The Projected Balance Sheet Forecasting Method Produces Accurate Results Unless

question 38

Multiple Choice

The projected balance sheet forecasting method produces accurate results unless which of the following condition(s) is (are) present?

• A) Fixed assets are "lumpy."
• B) Strong economies of scale are present.
• C) Excess capacity exists because of a temporary recession.
• D) Answers a,b,and c all make the projected balance sheet method inaccurate.
• E) Answers a and c make the projected balance sheet method inaccurate,but,as the text explains,the assumption of increasing economies of scale is built into the projected balance sheet method.

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Definitions:

Loss on Disposal

Loss on disposal occurs when the proceeds from the sale of an asset are less than its carrying amount on the books, resulting in a financial loss.

Bad Debt Expense

An expense reported on the income statement, representing the amount of uncollected receivables from customers during a period.

Gross Profit

Gross profit is the difference between sales revenue and the cost of goods sold before deducting overheads, interest, taxes, and other expenses.

Net Income

The amount of profit left after all operating expenses, taxes, and interest have been deducted from total revenue.