An Estimated Liability

question 198

Multiple Choice

An estimated liability:

• A) Is a liability that may occur if a future event occurs.
• B) Is not recorded until the amount is known for certain.
• C) Can be the result of a lawsuit.
• D) Is an unknown liability of a certain amount.
• E) Is a known obligation of an uncertain amount that can be reasonably estimated.

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Definitions:

Cash Operating Expenses

Expenses that a company pays in cash during an accounting period, excluding non-cash expenses such as depreciation.

Net Present Value

A financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

Discount Rate

The rate of interest utilized in the process of discounted cash flow analysis for assessing the present worth of future cash flows.

Profitability Index

A financial tool that calculates the relationship between the costs and benefits of a proposed project through its net present value.