Where Budget Targets Have Proven to Be Unrealistically Optimistic, Management

question 17

Multiple Choice

Where budget targets have proven to be unrealistically optimistic, management is best advised to:

• A)revise budgets to match actual results.
• B)revise budgets into the realm of achievability.
• C)insist that junior management conform to budgets.
• D)ignore budgets and allow managers to use their own initiative.

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Definitions:

Present Value Interest Factors

Present value interest factors are used to calculate the present value of a future amount of money or stream of cash flows given a specific interest rate.

Lease Liability

A financial obligation representing the present value of future lease payments owed by a lessee under a lease agreement.

Implicit Lease Rate

The interest rate assumed in the lease payments, often used to calculate the present value of lease payments in lease agreements.

Guaranteed Residual Value

An assurance to lessees that the asset being leased will have a specified value at the end of the lease term, affecting lease payments and financial planning.