Bad Managerial Judgments or Unforeseen Negative Events That Happen to a Firm

question 32

True/False

Bad managerial judgments or unforeseen negative events that happen to a firm are defined as "company-specific," or "unsystematic," events, and their effects on investment risk can in theory be diversified away.

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Definitions:

Budget Variance

The difference between the budgeted amounts and the actual amounts spent or received.

Fixed Overhead Volume Variance

The difference between the budgeted and actual quantity of units produced, multiplied by the fixed overhead rate per unit.

Unfavorable

A term used to describe variances or differences that negatively impact profitability or efficiency, often indicating higher costs or lower revenue than expected.

Favorable

A term used in accounting and finance to describe situations where actual costs are less than budgeted or expected costs, or revenue is higher than anticipated.