A Basic Difference Between Loss Contingencies and "Real" Liabilities Is

question 72

Multiple Choice

A basic difference between loss contingencies and "real" liabilities is:

• A) Liabilities stem from past transactions; loss contingencies stem from future events.
• B) Liabilities always are recorded in the accounting records, whereas loss contingencies never are.
• C) The extent of uncertainty involved.
• D) Liabilities can be large in amount, whereas loss contingencies are immaterial.

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Definitions:

Income Ratios

Financial metrics comparing various components of a company's income statement to assess performance and profitability.

Noncash Assets

Assets that are not in the form of cash and can include items such as property, equipment, and intellectual property.

Fair Value

Fair value is the estimated market price of an asset or liability, reflecting its value in an arm's length transaction between willing parties.

Book Value

The net value of a company's assets expressed on its balance sheet, calculated as total assets minus intangible assets and liabilities.