The Expected Cash Flow Approach Values an Asset or Liability

question 40

True/False

The expected cash flow approach values an asset or liability using a range of estimated future cash flows times the probability of their occurrence discounted at the risk-free rate of return.

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Definitions:

Spending Variance

The difference between the actual amount of an expense and the budgeted or planned amount.

Static Planning Budget

A budget based on a fixed level of activity and not adjusted for actual activity levels.

Flexible Budget

A report showing estimates of what revenues and costs should have been, given the actual level of activity for the period.

Revenue Variance

The difference between the actual revenue earned by a business and its expected (or budgeted) revenue, which can be favorable or unfavorable.