The risk of an accounting loss from a financial instrument due to possible failure of another party to perform according to terms of the contract is known as: [A] Credit risk [B] Investment risk [C]Market risk [D]Opportunity risk.

Q: If a firm is interested in the current cost of its debt obligations, then it can simply look at the…

A: Cost on debt can be considered after deducting tax expenses. Cost of debt is eligible for tax…

Q: In the context of handling debt - like items in M&A, what is the most buyer-friendly approach for…

A: The most buyer-friendly approach for items representing a hard claim that must be paid post-close in…

Q: Short-term debt should be excluded in the estimation of WACC if it is a permanent source of…

A: B.'False' is an incorrect answer as WACC full form is the weighted average cost of capital and if it…

Q: What type of concessions might a creditor grant the debtor in a troubled-debt situation?

A: Debt is the amount owed by the company for a particular period from the date of the company's…

Q: Which of the following is TRUE regarding the requirement for a company to exclude Short- Term…

A: The correct answer is 4. All of the above are true. According to the accounting principles, a…

Q: Governments should disclose their vulnerability to specific types of risks A.) Credit risks B.) Co

A: Transparency is essential for effective governance, and disclosing vulnerabilities to risks is an…

Q: Systemic risk is a) credit risk. b) an insurance contract against the default of one or more…

A: Systemic risk refers to the risk of widespread disruption or collapse of an entire financial system…

Q: Describe some ways to manage credit risk at a nonfinancialcompany

A: Evaluation of the customer prior to granting credit. Nonfinancial Company does self-evaluation or…

Q: The understatement of debt, whether due to error or fraud, is considered to be a major potential…

A: Understatement of debt: This occurs when an entity fails to completely disclose the debt it owes to…

Q: For hedge accounting to be used, U.S. GAAP requires that these criteria must be satisfied, except: O…

A: The objective of hedge accounting is to match the timing of income statement recognition of the…

Q: With respect to Long-Term Debt, please describe the tests of controls and substantive procedures…

A: Auditors primary responsibility is to form an opinion on financial statements. To form an opinion on…

Q: define contingent liability and give an example. How would you management of a company distort a…

A: Solution Concept Contingent liability               Contingent liability means the liability which…

Q: What are the general rules for measuring and recognizinggain or loss by both the debtor and the…

A: At the time when restructuring of a loan is taking place, the creditor must compute the loss…

Q: Why are most decision makers particularly concerned about the amount of current liabilities reported…

A: A current liability is a debt that the company intends to pay off right away using resources that…

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.