The Going Concern Assumption

question 271

Multiple Choice

The going concern assumption:

• A) Means that we can express transactions and events in monetary, or money, units.
• B) Means that a business is accounted for separately from other business entities, including its owner.
• C) Presumes that the life of a company can be divided into time periods, such as months and years, and that useful reports can be prepared for those periods.
• D) Prescribes that a company record the expenses it incurred to generate the revenue reported.
• E) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

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Definitions:

Net Present Value

A financial metric that calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Present Value

The contemporary valuation of foreseeable future earnings or sequences of cash payments, taking into account a specified interest rate.

Net Present Value Method

A method of evaluating the profitability of an investment by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Rate Of Return

A financial ratio used to calculate the gain or loss of an investment over a specified period, expressed as a percentage of the investment's initial cost.