An Important Reason for Making Financial Projections Is Forecasting Whether

question 104

Multiple Choice

An important reason for making financial projections is forecasting whether the firm will need money from outside sources in the coming year. If the planning assumptions result in a need for extra money, it shows up in the plan as:

• A)a negative net income.
• B)a negative equity account.
• C)an increase in debt.
• D)a very substantial drop in revenue.

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Definitions:

Fundamental Attribution Error

The tendency to underestimate situational influences and overestimate personal traits as causes of others' behaviors.

Personal Factors

Individual attributes such as personality, beliefs, and experiences that influence one's behavior and perceptions.

Peter Principle

A theory suggesting that people are promoted to their level of incompetence in a hierarchical organization.

Primacy Effect

The tendency to remember and give greater importance to information that is encountered first in a sequence.