The Importance of Trust as a Fundamental Principle Underlying Business

question 30

Multiple Choice

The importance of trust as a fundamental principle underlying business transactions is illustrated by expectations that:

• A) investors will be able to earn a return on their investments.
• B) employees may be discharged at any time for any reason without notice.
• C) litigation is inevitable because parties to agreements usually break promises.
• D) insider trading proves that the economic system underlying business is flawed.

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Definitions:

Impairment Loss

A decrease in the book value of a company's asset when the asset's market value drops below its book value.

Statement of Cash Flows

A document that explains how fluctuations in balance sheet accounts and income streams affect cash and cash equivalents, dividing the analysis among operating, investing, and financing operations.

Capital Cost Allowance (CCA)

CCA is the tax deduction allowed in Canada for the depreciation of property used in a business or profession.

Depreciation

The accounting process of allocating the cost of tangible assets over their useful lives, reflecting the decrease in value over time.