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A Question of Life, Death, and Shareholder Returns - Views on News from Equitymaster
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The Equitymaster Research Digest

A Question of Life, Death, and Shareholder Returns
Jun 1, 2016

  • The lifespan of companies
  • Why American companies die early and Japanese businesses live longer
  • A correlation between company age and shareholder returns?
  • Vivek Kaul on What It Takes for Businesses to Survive

Going concern.

Have you ever come across this term in an annual report? I'm sure you have. And you have probably ignored it. But if you have an annual report handy, you are likely to find the following line in it...

  • The Directors have prepared the Annual Accounts of the Company on a 'going concern' basis.

Let's think about it for a moment. What is this 'going concern' all about?

'Going concern' is the assumption that the entity will continue its operation in the foreseeable future. It is assumed that the entity has neither the intention nor the need to liquidate or materially curtail the scale of its business operations. In short, the business is ALIVE.

Conversely, if a company is not a going concern, then it means that it has gone bankrupt. It's DEAD!

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