Question

For the following transaction, determine whether cash flows from operating activities will increase, decrease, or remain the same:
(g) Disclosed a contingent liability based on a pending lawsuit.

Answer 1

Disclosed a contingent liability based on a pending lawsuit the cash flows from operating activities will remain the same.

Disclosed a contingent liability based on a pending lawsuit the cash flows from operating activities will remain the same as contingent liability is recorded as footnotes to financial statements. They have no cash flow till the period the event occurs of which they are contingent.

Operational enterprise activities include inventory transactions, interest payments, tax payments, wages to personnel, and payments for rent. some other shapes of cash flow, which include investments, money owed, and dividends are not included in this phase.

A contingent liability is a liability that may or might not occur. This means the contingent legal responsibility will rely on destiny events. Long-time liabilities are predicted to pay through the years or the timeframe is extra than 12 months. However, short-term liabilities are predicted to pay within a year.

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