What Is a Disadvantage of Estimating a Trend Line Equation

question 62

Multiple Choice

What is a disadvantage of estimating a trend line equation by "eye-balling" the best fitting line to a scatter diagram?

• A) Provides quick approximations
• B) Is subject to human error
• C) Provides accurate forecasts
• D) Is too difficult to calculate
• E) Requires graph paper

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Definitions:

Inventory

The total value of goods and materials held by a company for the purpose of resale or production.

Partnership Interest

An ownership share in a partnership that represents a portion of the entity's assets and income.

Depreciate

To reduce the recorded value of an asset in financial accounts over its useful life to reflect wear and tear, obsolescence, or decline in value.

Holding Period

The length of time an investment is held before being sold, which can affect the capital gains tax owed upon sale.