Which of the Following Is an Indicator That the Company

question 31

Multiple Choice

Which of the following is an indicator that the company may not be able to continue as a going concern?

• A) issuing bonus shares to shareholders instead of cash dividends
• B) a high level of borrowing
• C) negative cash flows from operating activities
• D) introduction of a new product into the market

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Definitions:

Discount Rate

This refers to the interest rate applied for computing the present value of forthcoming cash flows in the context of discounted cash flow analysis.

Present Value

The current valuation of future monetary sums or cash flow streams, using a given return rate for discounting.

Capital Cost Allowance (CCA)

A taxable expense in Canada that a business can claim for the depreciation of tangible property.

Required Rate Of Return

The lowest annual return percentage that persuades individuals or companies to commit capital to a particular project or security.