Budgeting Is Used to Help Companies

question 21

Multiple Choice

Budgeting is used to help companies:

• A)plan to better satisfy customers
• B)anticipate potential problems
• C)focus on opportunities
• D)All of these answers are correct.

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Definitions:

Present Value

The worth at present of future monetary sums or cash flow streams, evaluated with a preset rate of return.

Cash Flows

The sum of funds flowing in and out of a company, particularly as it influences liquidity.

Capital Budgeting Project

A process of evaluating and selecting long-term investments that are expected to generate revenues or reduce costs, aiding in a firm's strategic planning.

Weighted Average Cost of Capital (WACC)

WACC is a calculation of a firm's cost of capital, where each category of capital (debt, equity) is proportionately weighted.