Financial planning models are most apt to omit:
A)the changes in net working capital required for additional sales.
B)the increases in costs required to increase sales.
C)any change in retained earnings due to changes in the income statement.
D)the timing,risk,and size of the cash flows.
E)any additions that might be needed to fixed assets.

Question

Quizplus · Accepted Answer

Financial planning models often simplify assumptions and focus on projections of income, expenses, and cash flows. This may lead to the omission of factors such as timing, risk, and size of cash flows, which can significantly impact the accuracy of the model's results. Factors such as net working capital requirements, costs necessary to increase sales, and additions needed to fixed assets are often considered in financial planning models. Changes in retained earnings due to changes in the income statement can also be accounted for through adjustments to the equity section of the balance sheet.

Financial Planning Models Are Most Apt to Omit