Unrealistic Simplifying Assumptions Should Be Avoided Because They Cause the Analysis

question 112

True/False

Unrealistic simplifying assumptions should be avoided because they cause the analysis that is based on the assumption to be incorrect.

---

Definitions:

Scenario Analysis

A method of examining potential future occurrences by evaluating different possible results or scenarios.

Sensitivity Analysis

A strategy for determining the influence that different independent variable levels have on a targeted dependent variable, under predefined assumptions.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the degree to which a company can increase profits by increasing sales.

Forecasting Errors

Discrepancies between predicted values and the actual outcomes that were not anticipated in statistical forecasts.