Unless the Probability of Any Outflow in a Settlement Is

question 41

Multiple Choice

Unless the probability of any outflow in a settlement is remote,an entity needs to disclose for each class of contingent liability:

• A) the possibility of any reimbursement.
• B) an indication of the timing and amount uncertainties.
• C) an estimate of its financial effect.
• D) All of the given answers must be disclosed.

---

Definitions:

Project Profitability Index

The Project Profitability Index is a financial metric used to evaluate the attractiveness of an investment or project, calculated as the present value of future cash flows divided by the initial investment.

Investment Proposals

Formal suggestions or plans put forward for consideration, relating to the allocation of resources to generate financial gains.

Preference

In finance, this term relates to shares or securities that have priority over common shares in the payment of dividends and upon liquidation.

Profitability Index

A calculation that determines the relative profitability of an investment, calculated by dividing the present value of future cash flows by the initial investment cost.