Explain in your own words what Merck means by this statement. In particular, include what they mean by “materi?
The Company currently anticipates that two U.S. Vioxx Product Liability Lawsuits will be tried in 2009. In each of these cases the Company believes it has strong points to raise on appeal and therefore that unfavorable outcomes in such cases are not probable. Unfavorable outcomes in the Vioxx litigation could have a material adverse effect on the Company’s financial position, liquidity and results of operations.”[1]
Explain in your own words what Merck means by this statement. In particular, include what they mean by “material adverse effect” and “not probable.”
2. Who is in the best position to determine the outcome of a lawsuit?
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Material means to be of substance, to be important, to be larger than trivial. In this use it is a specialized financial and accounting word meaning "the effect will be so small, we won't notice it."
The company's litigators have enough experience to offer (an educated guess) a professional opinion of the likely outcome of a trial. Of course, nobody knows, and the litigators are paid by the company for their rosy predictions, so consider the source.