Question

All of the following are ways to reduce coping with uncertainty in the cash budget EXCEPT

Group of answer choices:

a.) careful estimation of cash budgets inputs

b.) developing a probability distribution of ending cash flows for each month by simulating the occurrance of sales and other uncertain events

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 situations.

Answer 1

C.Always using the prior year's data for estimates of the future.

It is not suggested to use the prior year's data to make estimates of the future, since it cannot always be said that history repeats by itself.

Using various statistical methods is preferrable for coping with uncertainity in the cash budget.

The following methods can be used to reduce coping with uncertainity;

Careful estimation of cash budgets inputs.

Probability distribution, Simulation analysis.

Using scenario analysis.