It Is Extremely Difficult to Estimate the Revenues and Costs

question 43

True/False

It is extremely difficult to estimate the revenues and costs associated with large,complex projects that take several years to develop.This is why subjective judgment instead of a discounted cash flow analysis is recommended for such projects.

---

Definitions:

Cost Estimation

The process of predicting the costs associated with a particular action or project, crucial for budgeting and project planning.

Operating Leverage

A measure of how sensitive net operating income is to a given percentage change in unit sales.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportion of fixed costs in a company's cost structure.

Break-Even Point

The level of production or sales at which total revenues equal total costs, resulting in no profit or loss.