A Contingent Liability

question 149

Multiple Choice

A contingent liability:

• A)Is always of a specific amount.
• B)Is a potential obligation that depends on a future event arising out of a past transaction or event.
• C)Is an obligation not requiring future payment.
• D)Is an obligation arising from the purchase of goods or services on credit.
• E)Is an obligation arising from a future event.

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Definitions:

Market Value

Market value is the current price at which an asset or service can be bought or sold in the open market.

All Cash Deal

A type of transaction where the purchase of a company or asset is made entirely with cash, without the use of stocks or other forms of financing.

Incremental Value

The additional value generated from a particular action or decision, compared to what would have occurred without it.

Equity-Financed

A method of raising capital by selling company shares to investors as opposed to incurring debt.