When a Company Determines That Estimated Future Cash Flows from an Asset

question 81

Multiple Choice

When a company determines that estimated future cash flows from an asset are different from the book value of the asset,it records:

• A)an asset impairment gain,if the value of the cash flows exceeds the asset's book value.
• B)an asset impairment loss,if the value of the cash flows exceeds the asset's book value.
• C)an asset impairment gain,if the asset's book value exceeds the value of the cash flows.
• D)an asset impairment loss,if the asset's book value exceeds the value of the cash flows.

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Definitions:

PE Ratio

A valuation metric for stocks, calculated by dividing the current market price of a stock by its earnings per share.

Earnings Per Share

A financial metric that divides a company's profit by the outstanding shares of its common stock.

Convertible Preferred Stock

Equity securities that offer the owner the right to convert into a specified number of the company's common stock, often at a pre-determined time.

Common Stock

A type of equity security that represents ownership in a corporation, with rights to vote on corporate matters and receive dividends.