Which of the Following Statements Best Describes a Contingent Liability

question 144

Multiple Choice

Which of the following statements best describes a contingent liability?

• A)The amount of a contingent liability is known and will definitely have to be paid in the future.
• B)A contingent liability is a potential liability that has arisen because of a past transaction or event,but its ultimate outcome will not be known until a future event occurs or fails to occur.
• C)A contingent liability will only be incurred if a particular future event takes place.
• D)A contingent liability is a potential liability that will be incurred if a natural disaster happens.

---

Definitions:

Takeover

The acquisition of control over another company, either through purchasing a majority stake of shares or by other means.

Leveraged Buyout

An acquisition of a company using a significant amount of borrowed money to meet the cost of acquisition.

Going-Private Transaction

A process in which a publicly traded company is transformed into a privately owned entity, often through a buyout.

Borrowed Money

Funds obtained through loans or credit from financial institutions or individuals, typically requiring repayment with interest.