A Certain Risk Has a 1% Likelihood of Occurrence in the Coming

question 1

Multiple Choice

A certain risk has a 1% likelihood of occurrence in the coming year. If the risk is observed, the organization estimates a loss of $1million. The risk is then assessed as

• A) 1%
• B) $1,000,000
• C) 1,000
• D) $10,000

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Definitions:

Acid-Test Ratio

A financial metric that measures a company's ability to pay its short-term liabilities with its most liquid assets, excluding inventory.

Current Assets

Assets that a company expects to convert into cash, sell, or consume within one year or within the operating cycle, including cash, inventory, and accounts receivable.

Accounts Receivable Turnover

A financial ratio that measures how many times a company collects its average accounts receivable in a period.

Allowance for Bad Debts

A financial accounting technique to estimate and offset the amount of receivables that may not be collected.