Creditors Are Primarily Interested in Short-Term Liquidity of the Company

question 146

True/False

Creditors are primarily interested in short-term liquidity of the company and its ability to make interest and principal payments.

Understand the principle of privity of contract and its exceptions, including the role of novation.

Appreciate the purpose and scope of contract law, including the doctrine of non est factum and its defenses.

Identify the roles of negotiable instruments in overriding privity rules and their impact on assignments.

Recognize the importance of equitable principles in contract law, including undue influence, misinterpretation, and the unconscionable bargain doctrine.

---

Definitions:

Impairment Loss

The amount by which the carrying value of an asset exceeds its recoverable amount, leading to a reduction in the asset's value on the balance sheet.

Realized Profit

Earnings that are generated and recorded when assets are sold for a price higher than their purchase cost.

Intercompany Sale

Transactions that occur between two entities within the same corporate group, which are eliminated during consolidation to avoid double-counting in financial statements.

Mark-Up

An amount added to the cost price of goods to cover overhead and profit.