What Should a Company Do If an Asset's Carrying Value

question 85

Essay

What should a company do if an asset's carrying value exceeds its recoverable amount due to poor estimates? How can companies keep such instances to a minimum?

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business.

Current Liabilities

Current liabilities are financial obligations a company is due to pay within one year, including accounts payable, short-term debts, and other similar liabilities.

Proportion

A segment, piece, or amount looked at in relation to the entirety.

Acid-test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick assets, providing insight into its short-term liquidity without relying on inventory assets.