What is an emergency plan?
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Welcome to Investors Trading Academy's talking glossary of financial terms and events.
Our word of the day is “contingency”
A liability that exists because of a circumstance (such as a lawsuit) that may cause a business loss in the future, dependent on other events that have not yet occurred (such as the outcome of a trial) and may never, in fact, happen. A contingency is a potentially negative economic event that may occur in the future. In the financial world, managers often try to identify and plan for all contingencies that they believe have some probability of occurring. To mitigate risk, financial managers often take an overly conservative approach, assuming slightly worse outcomes than expected and arranging a company's affairs so that it can weather negative outcomes with as little stress as possible.
To prepare for contingencies, financial managers often recommend building up significant cash reserves so that the company has strong liquidity even during times of poor sales or unexpected expenses. Managers may also try to proactively open lines of credit when a company is in a strong financial position to ensure access to credit during less favorable times.
Our word of the day is “contingency”
A liability that exists because of a circumstance (such as a lawsuit) that may cause a business loss in the future, dependent on other events that have not yet occurred (such as the outcome of a trial) and may never, in fact, happen. A contingency is a potentially negative economic event that may occur in the future. In the financial world, managers often try to identify and plan for all contingencies that they believe have some probability of occurring. To mitigate risk, financial managers often take an overly conservative approach, assuming slightly worse outcomes than expected and arranging a company's affairs so that it can weather negative outcomes with as little stress as possible.
To prepare for contingencies, financial managers often recommend building up significant cash reserves so that the company has strong liquidity even during times of poor sales or unexpected expenses. Managers may also try to proactively open lines of credit when a company is in a strong financial position to ensure access to credit during less favorable times.
By Barry Norman, Investors Trading Academy – ITA
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