All of the Following Are True Regarding the Key Principles

question 63

Multiple Choice

All of the following are true regarding the key principles of forecasting except:

• A) Financial statement forecasts need not be comprehensive.
• B) Forecasts should not manifest wishful thinking.
• C) Financial statement forecasts must be internally consistent.
• D) Financial statement forecasts must rely on assumptions that have external validity.

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Definitions:

Cement Manufacturer

A company engaged in the production of cement, a key ingredient in concrete.

Fixed Expenses

Costs that do not vary with the level of production or sales over a given period, such as rent or salaries.

Margin Of Safety

The difference between actual or budgeted sales and the break-even point, indicating the risk level of not covering fixed costs.

Contribution Format

A form of income statement where costs are divided into variable and fixed, and the contribution margin is calculated to determine profitability.