When Considering Whether or Not It Is Worthwhile to Commence

question 57

Multiple Choice

When considering whether or not it is worthwhile to commence an action or lawsuit,a prudent business manager must consider

• A)the staggering costs of the litigation,even if winning appears to be a certainty.
• B)that even if winning appears to be a certainty,it may be impossible to collect any money from the defendant.
• C)that there is always a risk of losing and having to pay the legal costs of the other party.
• D)that even if winning appears to be a certainty,the litigation may take up a huge amount of the business manager's time,which would be better spent concentrating on the business.
• E)all of the above

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Definitions:

Allowance for Doubtful Accounts

An estimate of the receivables that may not be collected, reducing gross receivables to a more realistic net value.

Uncollectible Receivables

Accounts receivable that a company has determined are unlikely to be collected and thus are written off as a bad debt expense.

Bad Debt Expense

An expense reported on the income statement, reflecting the cost of debts that are deemed uncollectible.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the amount of accounts receivable that may not be collectible.