It is common practice to develop optimistic and pessimistic scenarios when projecting financial statements.

Question

Quizplus · Accepted Answer

Developing both optimistic and pessimistic scenarios when projecting financial statements is a common practice in order to assess potential risks and opportunities. The optimistic scenario assumes favorable conditions such as high revenue growth and low costs, while the pessimistic scenario assumes unfavorable conditions such as low revenue growth and high costs. This helps businesses and investors make more informed decisions based on different outcomes.

It Is Common Practice to Develop Optimistic and Pessimistic Scenarios