Corporate Finance
Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
bartleby

Concept explainers

bartleby

Videos

Textbook Question
Book Icon
Chapter 7, Problem 1CQ

Forecasting Risk What is forecasting risk? In general, would the degree of forecasting risk be greater for a new product or a cost-culling proposal? Why?

Expert Solution & Answer
Check Mark
Summary Introduction

To discuss: Forecasting risk and whether its degree is greater, considering new product or a cost-cutting proposals.

The possibility for occurrence of errors in the projected cash flows will lead to a poor or incorrect decision-making, which is termed as forecasting risk.

Explanation of Solution

Forecasting refers to the predetermined plan or decision for a particular process. It helps to predict the future happenings with the help of analyzing trends and past data. The forecasting process is prepared mainly to avoid uncertain future risks. This helps to take immediate action on any future happening of the events. Any errors in such processes will lead to a forecasting risk.

Forecasting risk mainly occurs on new products rather than cost-cutting proposals because the prediction of a new product’s cash flow is difficult when compared to cost-cutting proposals.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
What is the relationship between return on capital investment and the risk associated with the anticipated sales of the product for which a new method will be used? Discuss.
How is it possible to achieve a higher rate of return without significantlyincreasing risk?
Explain Target Return on Investment?
Knowledge Booster
Background pattern image
Finance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Text book image
Personal Finance
Finance
ISBN:9781337669214
Author:GARMAN
Publisher:Cengage
Text book image
Corporate Fin Focused Approach
Finance
ISBN:9781285660516
Author:EHRHARDT
Publisher:Cengage
Text book image
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Text book image
International Financial Management
Finance
ISBN:9780357130698
Author:Madura
Publisher:Cengage
Text book image
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Investment Risk and Its Types; Author: EconClips;https://www.youtube.com/watch?v=qDZw_iKzJlI;License: Standard Youtube License