Which of the Following Statements Does Not Describe an Essential

question 68

Multiple Choice

Which of the following statements does not describe an essential characteristic of a liability?

• A)A liability is a present obligation that will be settled by a probable future transfer or use of assets.
• B)The obligated entity has little or no discretion to avoid the future sacrifice.
• C)The identity of the recipient must be known to the obligated party.
• D)The transaction or event obligating the enterprise has already occurred.

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Definitions:

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales, indicating how revenue growth translates into growth in operating income.

Variable Expenses

Costs that change in proportion to the level of business activity or production volume.

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, remaining constant over a period.

Target Profit

The desired financial gain a company aims to achieve within a specific period through its operations and sales.