Forecasting risk is deﬁned as the:
A) Potential for the net income projections of a project to be erroneous.
B) Investigation of what happens to net present value when one estimated value is changed.
C) Possibility that errors in projected cash ﬂows will result in incorrect decisions.
D) Study of how changes in variable costs affect the net present value of a project.
E) Analysis of how the break-even point moves as the contribution margin changes over time.

Question

Quizplus · Accepted Answer

Forecasting risk refers to the possibility that inaccuracies in projected cash flows can result in incorrect decisions. Option A is related to net income projections and not forecasting risk. Option B is related to sensitivity analysis and not forecasting risk. Option D is related to cost-volume-profit analysis and not forecasting risk. Option E is related to break-even analysis and not forecasting risk.

Forecasting Risk Is Deﬁned as The