Shawn Is Doing Some Budgeting for His New Start-Up Business

question 1

Multiple Choice

Shawn is doing some budgeting for his new start-up business. He has developed a budget in Excel using formulas, as he was taught to do in university. Which of the following statements is true?

• A)If Shawn changes one of his assumptions, Excel will automatically recalculate the budget numbers.
• B)Shawn would use sensitivity analysis to check the impact of changing his price.
• C)Shawn would use roll-up to review his summary numbers.
• D)Shawn would use what-if analysis to check the impact of changing his price and the commission he pays his sales people.
• E)Shawn would use goal-seeking analysis to examine the impact of changing his forecast of units sold.

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Definitions:

Rational Model

A decision-making approach based on logical and systematic analysis of information and alternatives to achieve the most reasonable outcome.

Optimize

The act of making something as effective, perfect, or useful as possible, often involving the allocation of resources in the most efficient way.

Satisfice

Satisfice is a decision-making strategy that involves choosing an option that meets the minimum requirements necessary for satisfaction, rather than optimizing for the best possible outcome.

Escalation of Commitment

A phenomenon where people increase their investment in a decision despite new evidence suggesting it may be wrong, often due to cognitive biases or emotional attachment.