The Risk Associated with Unavailable Funds When There Is a Need

question 65

Multiple Choice

The risk associated with unavailable funds when there is a need to make a payment is which of the following?

• A)exchange rate risk
• B)default risk
• C)liquidity risk
• D)interest rate risk

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Definitions:

Interest Expense

The cost incurred by an entity for borrowing funds, typically reported on the income statement.

Notes Payable

Written promises to pay specified sums of money at future dates, representing liabilities or debt owed by a company.

FICA Tax

Federal Insurance Contributions Act tax, a United States federal payroll tax imposed on both employees and employers to fund Social Security and Medicare.

Federal Unemployment Tax

A tax paid by employers to fund the unemployment compensation program for laid-off workers.