Final answer:
The Going Concern Concept is an accounting principle signifying that a business is expected to continue its operations into the foreseeable future and does not intend to, nor is it likely to, go out of business. Firms cease to exist primarily because they are not able to generate sufficient profits to sustain their operations, leading to their closure.
Step-by-step explanation:
The concept that assumes an entity will remain in operation for the foreseeable future and that market value is only relevant when a business is going out of business is the Going Concern Concept.
This accounting principle dictates that companies should prepare financial statements under the assumption that they will continue operating, rather than being liquidated or sold. It allows businesses to defer some of their prepaid expenses and non-current assets over future periods when the organization is expected to be in operation.
Firms typically cease to exist when they are unable to generate sufficient profits to remain viable. This could be due to a variety of factors such as poor management, inability to compete effectively, lack of consumer demand, or greater operational costs than revenues. In cases where continued operations are predicted to result in ongoing losses, it may make more financial sense for a firm to close rather than to keep producing output.