Which of the Following Is a Disadvantage of Using the Standards

question 71

Multiple Choice

Which of the following is a disadvantage of using the standards developed by a firm itself to develop a budget?

• A) A firm's inefficiencies will be part of the data.
• B) They are not based on realized benchmarks.
• C) The expected future changes are not included in the standards.
• D) The flexible-budget amounts are difficult to determine.

---

Definitions:

Direct Method

A way to prepare the cash flow statement, where operating cash receipts and payments are listed directly to calculate net cash from operating activities.

Cash Payments

Financial transactions that involve the transfer of cash from one entity to another.

Income Taxes Payable

The amount of income taxes a company owes to governmental entities but has not yet paid.

Operating Activities

Operating Activities involve the cash flows that are generated from the primary business activities of a company, such as selling products or services.