Which of the Following Is a Reason Why Risk Analysis

question 56

Multiple Choice

Which of the following is a reason why risk analysis is an important part of capital budgeting?

• A) The people who propose projects have no vested interest in whether or not they are accepted.
• B) Marketing managers are rarely excessively optimistic.
• C) Project cash flows can be highly uncertain.
• D) Financial analysts are rarely excessively pessimistic.

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Definitions:

Work in Process

Items that are in the middle stages of production, neither raw materials nor finished goods, reflecting the cost of ongoing manufacturing activities.

Property, Plant, and Equipment

Long-term assets owned by a business for use in production, manufacturing, or administrative functions, not intended for sale.

Standard Cost System

This system assigns predetermined costs to the manufacture of products and services, used for budgeting and controlling expenses.

Fixed Manufacturing Overhead Rate

A constant charge that represents the total fixed manufacturing overhead costs divided by the standard allocation base.