The Going Concern Assumption Implies That

question 64

Multiple Choice

The going concern assumption implies that:

• A) a firm will continue to be in business for the foreseeable future.
• B) a firm will be going out of business in the near future.
• C) a firm will continue to operate in the near future, but only after being acquired by another firm.
• D) None of the above.

---

Definitions:

Sustainable Growth Rate

The maximum rate at which a company can grow its revenues and earnings without having to increase leverage or equity financing.

Equity Multiplier

A financial leverage ratio that measures the portion of a company’s assets that are financed by shareholders' equity.

Fixed Assets Investment

Expenditures related to acquiring or improving long-term assets such as property, plant, and equipment that will be used in business operations.

Debt-Equity Ratio

The ratio demonstrating the proportionate role of debt and equity in a company's asset financing scheme.