Some Weaknesses in Financial Planning Models Include

question 66

Multiple Choice

Some weaknesses in financial planning models include:

• A) Interest expense is not accounted for.
• B) All working capital accounts do not necessarily vary directly with sales, especially cash and inventory.
• C) How fixed assets are adjusted.
• D) All of the above are weaknesses.

Apply knowledge of trade theory to evaluate national policy decisions.

Understand how taxes affect market equilibrium, including changes in consumer surplus, producer surplus, and government revenue.

Understand the concept of deadweight loss and how taxes contribute to it.

Analyze the impact of taxes on market size and participant behavior.

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Definitions:

Adverse Selection

A situation in which one party in a transaction has more or better information than the other, leading to an imbalance that can result in market inefficiency or failure.

Insurance Premium

The amount of money an individual or organization pays for an insurance policy, providing coverage against specific risks over a defined period.

Expected Loss

a calculation used in finance and insurance to estimate the average financial loss or cost associated with an investment or insurance policy over a period.

Adverse Selection

A situation in which one party in a transaction has more information than the other, leading to an imbalance and potentially poor market outcomes, commonly seen in insurance markets.