When Using Decision Tree Analysis

question 29

Multiple Choice

When using decision tree analysis:

• A) the sum of the expected payoffs must always equal zero.
• B) round nodes represent decision points.
• C) there must be more square nodes than round nodes.
• D) probabilities for all branches leaving a chance node must sum to 1.0.

---

Definitions:

Materiality Constraint

An accounting principle that allows for the exclusion of insignificant financial information from reports because it would not impact decision-making.

Accounting Information

Data related to financial transactions and status of a business, used for analysis, decision making, and financial reporting.

Ending Retained Earnings

The amount of net income left over for the business after it has paid out dividends to its shareholders, captured at the close of an accounting period.

Revenues

The total income generated by a business from its normal business operations, including sales of goods and services, before any expenses are deducted.