Which of the Following Statements Is True

question 60

Multiple Choice

Which of the following statements is true?

• A) To help combat optimistic bias when estimating a project's cash flows, companies place responsibility for analyzing an investment proposal under an independent authority from the group proposing the project.
• B) Financial experts need to have a sense of what is reasonable when forecasting a potential project's profit margin and growth potential.
• C) Financial analysts need to be prepared to defend their assumptions for a potential project and explain why their estimates do not agree with those offered by the project's advocates.
• D) All of the above are true.
• E) Only (a) and (c) are true.

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Definitions:

Investing Activities

Investing activities are financial transactions related to the acquisition or disposal of long-term assets and other investments not considered cash equivalents, as detailed in the statement of cash flows.

Financing Activities

Activities that result in changes in the size and composition of the equity capital or borrowings of the company, as reported in the statement of cash flows.

Accounts Payable

A company's financial liability to its suppliers or creditors for received goods and services.

Accounts Receivable

Accounts Receivable are amounts owed to a business by its customers from sales or services provided on credit.