What Is the Minimum Probability of Collection That Should Be

question 75

Multiple Choice

What is the minimum probability of collection that should be accepted by firms that have a 25% profit margin? Ignore the time value of money and assume that there is no chance of subsequence sales.

• A) 20%
• B) 25%
• C) 50%
• D) 75%

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Definitions:

Loss Contingencies

Possible financial losses that companies may face as a result of future events that have uncertain outcomes, necessitating disclosure in financial statements if they are both probable and estimable.

Gain Contingencies

Gain contingencies are potential increases in economic benefits to an organization that arise from events whose outcomes or realizations are uncertain until they occur.

Fiscal Year

A one-year period that companies and governments use for financial reporting and budgeting, which does not necessarily align with the calendar year.

Coupons

Debt instruments offering interests or discounts issued by companies to raise capital, or vouchers offering discounts on goods and services.