When changing financial model assumptions, which of the following is true?
A) Change more than one assumption at a time
B) Make large changes in assumptions
C) Change only one assumption at a time
D) Only change assumptions impacting the income statement
E) Only change assumptions impacting the balance sheet

Question

Quizplus · Accepted Answer

Changing only one assumption at a time ensures that the impact of each change can be accurately measured and isolated. Changing more than one assumption at a time can make it difficult to determine which change had the greatest impact on the financial model's outcome. Making large changes in assumptions can lead to unrealistic and unreliable results. It may also be important to change assumptions impacting both the income statement and balance sheet depending on the specific modeling situation.

When Changing Financial Model Assumptions, Which of the Following Is