Uncertainty and the Budgeting Process: as Indicated in the Text

question 13

Essay

Uncertainty and the Budgeting Process: As indicated in the text, the validity of pro-forma financial statements that are produced as part of the master budgeting process is affected by the accuracy of the forecasted data going into the component budgets.Such data are subject to various levels of uncertainty.For this reason, accountants need to understand ways of dealing with uncertainty in the budgeting process.
Required: Define and distinguish among the following ways of handling uncertainty in the budgeting process:
1.What-if analysis (give at least one concrete example)
2.Sensitivity analysis
3.Scenario analysis.

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Definitions:

Relationship Termination

The ending of a personal or professional relationship between two or more parties.

Fecal Incontinence

The inability to control bowel movements, causing unintentional loss of stool from the rectum.

Long-Term Memory Losses

The inability to recall past events, information, or experiences that persists over a long period, often due to injury or disease affecting the brain.

Rapid Speech

A pattern of speaking at an unusually fast pace, which can sometimes indicate nervousness, excitement, or certain psychological conditions.