The Closing Process Is Necessary in Order To

question 104

Multiple Choice

The closing process is necessary in order to:

• A)Calculate net income or net loss for an accounting period.
• B)Ensure that all permanent accounts are closed to zero at the end of each accounting period.
• C)Ensure that the company complies with state laws.
• D)Ensure that net income or net loss and dividends for the period are closed into the retained earnings account.
• E)Ensure that management is aware of how well the company is operating.

Apply the dividend discount model (DDM) for calculating the current price of a stock given its future dividend growth and required return rate.

Calculate the value of a stock based on constant growth dividend models.

Calculate the expected rate of return using dividend growth models in various scenarios.

Evaluate stocks based on dividends and price appreciation as main components of future cash flows.

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Definitions:

Abnormally Dangerous Activity

Activities that inherently carry a significant risk of harm to others or property, where the activity is not common usage and the risk cannot be entirely eliminated.

Contractual Liability

The legal obligations that parties have under a contract, including the consequences of breach.

Principal

The main party to a transaction, acting on their own behalf, such as the owner of a business or the person for whom an agent acts.

Third Party

A third party is an individual or entity who is not directly involved in a legal agreement or dispute but may be affected by it or have rights or obligations related to it.