Overconfidence Bias

question 19

Multiple Choice

Overconfidence bias

• A)is the tendency of decision makers to be influenced by the way that problems are framed.
• B)occurs when looking backward in time where mistakes seem obvious after they have already occurred.
• C)refers to the tendency for individuals to rely too heavily on a single piece of information.
• D)occurs when individuals overestimate their ability to predict future events.

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Definitions:

Sustainable Growth Rate

The maximum rate at which a company can grow its revenues and earnings without needing to increase financial leverage.

Assumptions

Premises or conditions accepted as true or certain without proof for the purpose of further analysis or argument.

Basic Assumptions

Fundamental beliefs or principles that underlie the financial accounting system, including economic entity, monetary unit, time period, and going concern.

Internal Growth Rates

The maximum rate at which a company can expand using only internal financial resources without resorting to borrowing or seeking new equity investment.