Generally Accepted Accounting Principles

question 55

Multiple Choice

Generally accepted accounting principles

• A)are accounting rules formulated by the Internal Revenue Service.
• B)are sound in theory but rarely used in real life.
• C)are accounting rules that are recognized as a general guide for financial reporting.
• D)have eliminated all errors in accounting.

---

Definitions:

New Venture

A newly established business enterprise, particularly one that is entrepreneurial in nature, aiming to meet a marketplace need by developing a viable business model around a product, service, process, or platform.

Certainty Equivalent Approach

A method to evaluate risk where uncertain future cash flows are converted into certain cash flows under the assumption of risk neutrality.

Risk-Free Rate

The interest rate excluding all risk premiums. The risk-free rate consists of the pure rate and an inflation adjustment. It is approximated by the three-month treasury bill rate. Written as kRF.

Real Option

The value of additional decision-making opportunities available to an investor or company once an initial investment has been made.