The Consistency Convention Requires That

question 174

Multiple Choice

The consistency convention requires that

• A) a company use the same independent auditors year after year.
• B) all companies operating in the same industry use the same accounting methods.
• C) the selection of a company's accounting policies be disclosed in its financial statements.
• D) a company use the same accounting procedures year after year.

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Definitions:

Scrap Value

The estimated resale value of an asset at the end of its useful life, which is considered during the depreciation calculation of that asset.

Required Rate of Return

The minimum rate of return on an investment deemed acceptable by an investor, considering the investment's risk.

Internal Rate of Return

A financial metric used to evaluate the profitability of potential investments, calculating the discount rate that makes the net present value of all cash flows equal to zero.

Payback Period

Payback period is the duration required to recover the cost of an investment, calculated by dividing the initial investment by the annual cash inflow.