If an Event Makes It Probable That a Company Will

question 92

Multiple Choice

If an event makes it probable that a company will experience a cash outflow but it cannot reasonably estimate the amount, the contingent liability

• A) should be recorded in the accounts.
• B) should be disclosed in the notes to the financial statements.
• C) should not be recorded or disclosed in the notes until the contingency actually happens.
• D) must be paid for the amount estimated.

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Definitions:

Constant Growth

A model assuming that dividends, earnings, or other financial metrics grow at a steady, unchanging rate indefinitely.

Balance Sheet

A financial statement showing a company's assets, liabilities, and equity at a specific point in time, providing a snapshot of its financial condition.

Capital Structure

The mix of different types of debt and equity a company uses to finance its operations.

New Common Stock

Shares issued by a company for the first time to the public, typically through an Initial Public Offering (IPO) or additional issuance.