Financial planning models:
A) are primarily used to evaluate the differences between actual and planned volume
B) are not part of sensitivity analysis
C) are mathematical representations of the relationships among factors such as operating and financing activities that affect the budget
D) allow for analysis of changes in predicted data but not the other underlying assumptions of the budget

Question

Quizplus · Accepted Answer

Financial planning models are mathematical representations of the relationships between various factors that impact the budget, including both operating and financing activities. They help evaluate the impact of changes in these factors on the overall financial plan. Option A is incorrect because financial planning models can be used for evaluating various aspects of the budget, not just volume. Option B is incorrect because sensitivity analysis refers to analyzing the impact of changes in certain assumptions on the financial plan, which is a key component of financial planning models. Option D is incorrect because financial planning models allow for analyzing changes in all aspects of the budget, including underlying assumptions.

Financial Planning Models