If a Business Knows That a Liability Exists but Does

question 184

True/False

If a business knows that a liability exists but does not know the exact amount,the business must estimate the amount of the liability and report it on the balance sheet.

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Definitions:

Original Investment

The initial amount of money used to purchase an asset or start an investment.

Cash Inflows

Money received by a business from its operations, financing, or investing activities.

Net Present Value

The divergence of cash inflows’ current worth from cash outflows’ present value during a defined duration.

Discount Rate

The interest rate used to discount future cash flows of a financial instrument to present value, reflecting the time value of money and investment risk.