Which of the Following Statements Does Not Apply to Preventing

question 42

Multiple Choice

Which of the following statements does not apply to preventing "garbage in,garbage out" when implementing a forecasting game plan?

• A) The quality of the financial statement forecasts will depend on the quality of the
• Forecast assumptions.
• B) The quantities forecasted within financial statement forecasts will depend on the quantity of the forecast assumptions.
• C) Analysts should justify and evaluate the most important assumptions that reflect the critical risk and success factors of the firm's strategy.
• D) Analysts can impose reality checks on the assumptions by analyzing the forecasted financial statements using ratios, common-size, and rate-of-change financial statements.

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Definitions:

Fair Value

An estimate of the price at which an asset or liability could be traded in a fair transaction between willing parties, neither under compulsion to act.

Equity Method

An accounting technique used by a company to record investments in other companies, where the investment is initially recorded at cost and adjusted thereafter for the post-acquisition change in the investor’s proportion of net assets in the investee.

Investor Corporation

Typically refers to a company whose primary business is holding, investing in, and managing securities for investment purposes.

Dividends

Payments made by a corporation to its shareholders from the company's profits or reserves.