The Projected Balance Sheet Forecasting Method Produces Accurate Results Unless

question 180

Multiple Choice

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

• A)Fixes 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:

Valuation Technique

Methods and procedures used to estimate the value of an asset, liability, or company, including discounting cash flow analysis and comparative market analysis.

Expense Recognition

The accounting principle that costs are recorded in the period they are incurred in and matched with the revenues they help to generate.

Revenue Recognition

The accounting principle that determines the specific conditions under which income becomes realized as revenue.

Depreciable Asset

An asset subject to depreciation, which means its cost is allocated over its useful life due to wear and tear, deterioration, or obsolescence.