Which of the Following Is an Example of a Loss

question 23

Multiple Choice

Which of the following is an example of a loss contingency that should be disclosed in a footnote to a company's financial statements?

• A)The president of the company has threatened to resign if the board of directors does not vote to increase executive salaries.
• B)A lawsuit has been brought against the company,but the company hopes to prevail in the suit and thereby avoid any liability.
• C)The allowance for uncollectible accounts receivable is estimated at $200,000.
• D)The company owns special-purpose machinery which,if sold,would probably bring a price less than its current book value.

Learn how common-sized financial statements are prepared and analyzed.

Recognize the implications of changes in financial ratios over time.

Understand the relationship between financial analysis and business decision-making processes.

Develop skills in interpreting the effects of financial decisions on ratios and overall company performance.

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Definitions:

Operating Cash Flow

A measure of the cash generated by a company's normal business operations.

Amortization

The process of gradually writing off the initial cost of an asset over a period, typically for intangible assets such as patents or goodwill.

Intangible Assets

Long-term assets that are used in the operations of a business, are not held for sale, and are without physical qualities.

Spreadsheet Method

A computational approach that utilizes a software program or application designed for organizing, calculating, and managing data in columns and rows.