Which One of the Following Statements Concerning Scenario Analysis Is

question 50

Multiple Choice

Which one of the following statements concerning scenario analysis is correct?

• A) The pessimistic case scenario determines the maximum loss, in current dollars, that a firm could possibly incur from a given project.
• B) Scenario analysis defines the entire range of results that could be realized from a proposed investment project.
• C) Scenario analysis determines which variable has the greatest impact on a project's final outcome.
• D) Scenario analysis helps managers analyze various outcomes that are possible given reasonable ranges for each of the assumptions.
• E) Management is guaranteed a positive outcome for a project when the worst-case scenario produces a positive NPV.

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Definitions:

Budget

A financial plan that estimates income and expenditures for a future period, often used as a guide for financial decision-making and resource allocation.

Budgetary Control Process

A method for managers to set financial and operational goals with budgets, monitor performance, and take corrective actions to stay on track with objectives.

Budget

An estimate of income and expenditure for a set period of time, serving as a financial plan and control method.

Budgeted Balance Sheet

A budgeted balance sheet forecasts a company's financial position at the end of a future period, projecting assets, liabilities, and equity.