Which of the following represents a way of coping with uncertainty in a cash budget?
A) careful estimation of cash budgets outputs
B) developing a pro forma income statement to forecast sales and then express the various income statement items as percentage of projected sales
C) always using the prior year's data for estimates of the future
D) using scenario analysis, or "what if" approach, to analyze cash flows under a variety of circumstances

Question

Quizplus · Accepted Answer

Using scenario analysis, or "what if" approach, to analyze cash flows under a variety of circumstances is a way of coping with uncertainty in a cash budget. This approach allows for the consideration of multiple possible outcomes and the development of contingency plans to address potential cash shortages or surpluses. Option A may not account for unexpected events, Option B may not provide a complete picture of cash flows, and Option C may not reflect current changes that affect cash flows.

Which of the Following Represents a Way of Coping with Uncertainty