Which of the Following Is True of Flexible Budgets

question 98

Multiple Choice

Which of the following is true of flexible budgets?

• A) They serve only the control needs of management of an organization.
• B) They enable firms to compute expected costs for a range of activity levels.
• C) They allow managers to develop financial results for only one potential scenario.
• D) They do not require the managers to know the cost behavior pattern of each item in the budget.
• E) All of these are correct.

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Definitions:

Riskless Assets

Financial instruments that are considered to have a negligible risk of loss, often associated with government bonds.

Binomial OPM

Binomial Option Pricing Model, a mathematical model used to price options by simulating different paths of price movements and calculating the payoff for each.

Borrow

The act of receiving funds from a lender with the agreement to pay back the original amount plus interest at a future date.

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an underlying asset at a specified price within a predetermined time frame.