The Objective of Forecasting Is to Develop

question 58

Multiple Choice

The objective of forecasting is to develop:

• A) stand-alone financial statements for future analysis.
• B) a set of realistic expectations for future value-relevant payoffs.
• C) a balance sheet and income statement that articulate.
• D) financial statements for comparison to industry averages.

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Definitions:

Budgeting Slack

The practice of underestimating revenue or overestimating expenses while preparing a budget to create a cushion or slack for unexpected situations.

Budgetary Slack

The practice of underestimating revenues or overestimating expenses when preparing a budget to create a buffer for unexpected scenarios.

Uncertainty

The state of having limited knowledge where it is impossible to exactly describe existing state or future outcomes, often affecting decision-making processes.

Budgeted Profit and Loss Statement

A financial statement forecasting the revenue, expenses, and profit for a future period, based on management's estimates.