Which of the Following Describes a Liability

question 51

Multiple Choice

Which of the following describes a liability?

• A) The potential profit from selling a firm's assets and settling all of its debts
• B) A debt owed by a firm to an outside organization or individual
• C) Any economic resource expected to benefit a firm or an individual who owns it
• D) Any economic deficit expected to cost a firm or an individual who owns it
• E) The amount of money originally invested in a business by its owners

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Definitions:

Simple Rate of Return

A method to determine the efficiency of an investment, calculated by dividing the annual incremental net operating income by the initial investment's cost.

Investment Project

A project involving the allocation of resources with the expectation of future returns, such as profits or benefits.

Discount Factor(s)

Multipliers used in discounted cash flow (DCF) analyses to convert future cash flows into their present value, reflecting the time value of money.

Discount Rate

The discount rate applied to calculate the current value of future cash flows.