The Continuity Assumption Is Inappropriate When

question 48

Multiple Choice

The continuity assumption is inappropriate when

• A) liquidation appears likely.
• B) fair values are higher than costs.
• C) the business is organized as a proprietorship.
• D) the business is just starting up.

---

Definitions:

Interest Rate

The cost of borrowing money or the return on investment for savings, usually expressed as a percentage.

Utility Function

A mathematical representation of how different quantities of goods or services increase a consumer's satisfaction or happiness.

Risk Averse

A description of an individual or entity's preference to avoid risk, choosing certainty over potential higher rewards that come with greater risk.

Profitability

A financial metric indicating the extent to which a person or business generates more revenue than the costs incurred in producing its goods or services.