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Contingent Liabilities

Definition of Contingent Liabilities

A contingent liability is shown on a balance sheet for an event that may or may not happen in the future. The potential liability arising out of such an uncertain event is recorded as a contingency in both GAAP and IFRS accounting standards.

Related Terms

52 Week Low

A 52 week low is the lowest closing price of a stock or ETF in the last 365 days. Let’s say you check a stock’s history on 01-01-2022. Then the 52 week low will be the stock’s lowest closing price between 01-01-2021 and 01-01-2022. 52 week lows are used as technical indicators by traders.

Fixed Income Securities

Fixed Income Securities are issued in exchange for a loan and offer returns to investors in the form of a fixed interest rate. That’s why they are referred to as “fixed income” securities. The common types of fixed income securities are: Firm Allotment is the process of allocating shares during an IPO to investors who are not considered to be retail public investors. The firm allotment is done as per SEBI guidelines, which dictate that a portion of the IPO can be allocated to the likes of Mutual Funds, regular employees (permanent), and others.

  • Certificates of Deposit
  • Corporate Bonds
  • Municipal Bonds
  • Treasury Bonds
  • Treasury Bills

Such securities fall under the category of debt instruments, which means they do not give investors equity shares or ownership in the company but only a promise of returning the principal with interest on maturity.

Often referred to as the coupon rate, the interest on a fixed income security is determined by the creditworthiness of the issuing company or entity as well as the latest interest rate set by the government.

Fixed income securities also confer seniority of claim to investors, which means that the investors who’ve helped finance the loan will receive their money first in the event a company is liquidated.

Bracket Order

A bracket order is used in intraday trading to limit downside and lock upside by placing three types of orders together:

  • Buy or sell order at market price
  • Target order to square off & book profits
  • Stop-loss order to limit loss

Liquidity Ratio

The Liquidity Ratio is a tool in financial analysis for measuring a company’s ability to fulfil short-term debt obligations without the need to secure external financing. The key term here is liquidity.

Book Value

Book value of an asset is what you get by subtracting its accumulated depreciation from the original cost of the asset.

That’s why book value is referred to as the Net Asset Value (NAV) in the UK.

For a company, the book value is its total assets subtracted by liabilities, intangible assets and/or goodwill.

Cash and Cash Equivalents

Cash and cash equivalents are short-term assets or holdings which fall under the current assets of a business. Cash and cash equivalents have very high liquidity. When you take the term literally, you have two components:

  • Cash: money like cash holdings in a bank account, petty cash, and others
  • Cash equivalents: assets or investments like T-bills, commercial paper, and others that have a short maturity which can easily be converted into cash



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