Which Errors Will Likely Have the Largest Effect on the Net

question 14

Multiple Choice

Which errors will likely have the largest effect on the net present value of changes in assumptions and estimates?

• A)Errors in predicting the amounts of future cash flows.
• B)Errors in predicting the timing of future cash flows.
• C)Errors in predicting the discount rate.
• D)Errors in sensitivity analysis.

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Definitions:

Sales Discounts

Reductions granted from the listed price of goods or services, often used as a marketing strategy to encourage early payment or increase sales volume.

2/10, N/30

A payment term indicating that a buyer can take a 2% discount on the invoice amount if payment is made within 10 days; otherwise, the net amount is due in 30 days.

Sales Return

goods returned by the customers to the seller after the sale, reducing the gross sales figure.

Gross Profit

The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.