A Debt That a Business Owes to an Outside Party

question 135

Multiple Choice

A debt that a business owes to an outside party is called:

• A)an asset.
• B)a liability.
• C)stockholders' equity.
• D)revenue.

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Definitions:

Diversify Risk

The strategy of spreading investments across various financial instruments, industries, or other categories to reduce risk.

Synergies

The additional value created by combining two companies or entities, often realized through cost savings, increased revenues, or enhancements in productivity.

Cost of Equity

The return a company theoretically pays to its equity investors, i.e., shareholders, to compensate for the risk they undertake by investing their capital.

Acquisition

The process of acquiring control of another company by purchasing its shares or assets.