A Concentration of Credit Risk Is a Threat of Nonpayment

question 125

True/False

A concentration of credit risk is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of the company.

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Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, entitling holders to vote on corporate matters and receive dividends.

Long-term Investment

Investments held by an entity for an extended period, typically more than one year, such as bonds, stocks, or real estate.

Equity Method

A method where an investor recognizes its share of the profits and losses of the investee company it has invested in, proportionate to its ownership percentage.

Cost Method

An accounting method used to value certain investments or transactions at their original purchase cost, without reflecting subsequent changes in market value.