The Concept That a Business Has a Reasonable Expectation of Remaining

question 25

Multiple Choice

The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the

• A)economic entity assumption.
• B)monetary unit assumption.
• C)periodicity assumption.
• D)going concern assumption.

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Definitions:

Discounted Payback

A capital budgeting method that calculates the time required to break even from an investment based on its discounted cash flows rather than just the nominal cash flows.

Liquid Investments

Assets that can be quickly and easily converted into cash without significant loss in value, like stocks and bonds.

Payback

The period of time it takes for an investment to generate an amount of income or cash equal to the cost of the investment.

Discounted Payback

A capital budgeting method that calculates the time needed to recoup the initial investment in present value terms.