Brubaker & Goss Has Received Requests for Capital Investment Funds

question 1

Multiple Choice

Brubaker & Goss has received requests for capital investment funds for next year from each of its five divisions. All requests represent positive net present value projects. All projects are independent. Senior management has decided to allocate the available funds based on the profitability index of each project since the company has insufficient funds to fulfill all of the requests. Management is following a practice known as:

• A) scenario analysis.
• B) sensitivity analysis.
• C) leveraging.
• D) hard rationing.
• E) soft rationing.

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Definitions:

Uncollectible Accounts

Amounts owed to a company that it does not expect to collect due to customers being unable or unwilling to pay.

Allowance for Doubtful Accounts

An accounting provision made for receivables which may not be collectible.

Liability Account

An accounting record that reflects obligations or amounts owed to others, representing claims against the company's assets.

Investments Section

A portion of a financial statement or report that enumerates an entity's investments in other companies, bonds, stocks, or other financial assets.