Given One or More Hypothetical Assumptions, a Responsible Party May

question 6

Multiple Choice

Given one or more hypothetical assumptions, a responsible party may prepare, to the best of his knowledge and belief, an entity's expected financial position, results of operations, and changes in cash flows. Such prospective financial statements are known as:

• A)pro forma financial statements.
• B)financial projections.
• C)partial presentations.
• D)financial forecasts.

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Definitions:

Opportunity Cost

The cost of forfeiting the next best alternative when one option is chosen over another.

Comparative Advantage

The capability of a company, individual, or country to manufacture a product or offer a service with a reduced opportunity cost than competing entities.

Specialization

The process of focusing efforts and resources on a limited range of activities, goods, or services to gain efficiency or expertise.

Opportunity Cost

Declining the opportunity for potential benefits from a range of alternatives upon selecting one.