The Difficulty and Costs Involved in Maintaining the Legal Form

question 49

Multiple Choice

The difficulty and costs involved in maintaining the legal form of a business relates to

• A)the personal liability of the business owner.
• B)the complexity and organizational costs in setting up and maintaining an entity.
• C)the control of the business.
• D)the ability of the business to raise capital.

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Definitions:

Straight-Line Depreciation

Straight-line depreciation is a method to allocate the cost of a tangible asset over its useful lifespan evenly, implying an equal expense rate for each year of the asset's use.

After-Tax Discount Rate

The rate of return or discount rate applied to cash flows after accounting for the tax impact, used in net present value calculations.

Incremental Sales

The additional sales generated from a specific marketing campaign, sales activity, or product change, beyond regular expected sales.

Straight-Line Depreciation

A technique for distributing the expense of a physical asset evenly across its lifespan.