What Is a Liquidated Damages Clause and How Can It

question 67

Essay

What is a liquidated damages clause and how can it be used to manage risk in a contract? What are the limitations on their use?

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Definitions:

Net Income

The total earnings of a company after all expenses and taxes have been deducted from revenue, indicating the company's profit.

Trial Balance

An accounting report that lists the balances of all accounts in the general ledger at a particular point in time to check for errors.

Cash

Liquid assets held by a company, used to settle debts, purchase goods and services, or meet immediate needs; a fundamental indicator of financial health.

Debt Ratio

A financial ratio that measures the proportion of a company's total debt to its total assets, indicating the company's leverage.