The Separate Entity Assumption Means

question 42

Multiple Choice

The separate entity assumption means

• A)the financial information depicts the economic substance of the business activities.
• B)the financial reports of a business are assumed to include the results of only that business's activities.
• C)the results of business activities are reported in an appropriate monetary unit.
• D)the financial information can be compared across businesses because similar accounting methods have been applied.

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Definitions:

Market Efficiency

Market efficiency refers to the extent to which market prices reflect all available, relevant information, making it impossible to consistently achieve higher returns on investment without taking additional risk.

Fair Insurance Policy

A policy that is considered equitable, offering terms and conditions that are reasonable and just for both the insurer and the insured, without exploiting any party.

Premium

An amount paid for an insurance policy, reflecting the cost of obtaining insurance coverage.

Expected Value

A calculated average of the possible outcomes of a variable, taking into account the likelihood of each outcome.