CA CA Budgeting & Forecasting 2

Question 1

What is a 'rolling forecast'?

Accepted Answer

A continuously updated forecast that adds new periods as previous ones expire

Answer

A rolling forecast maintains a consistent planning horizon by appending new periods as each period expires, ensuring a continuous forward view is always available.

Question 2

Which forecasting method uses historical data patterns, trends, and seasonality to project future values?

Accepted Answer

Time series analysis

Answer

Time series analysis is a quantitative forecasting technique that uses historical data patterns, including trends and seasonal cycles, to project future values.

Question 3

What is a 'flexible budget'?

Accepted Answer

A budget that adjusts projected costs and revenues based on actual activity levels

Answer

A flexible budget adjusts total budgeted costs to reflect the actual volume of activity achieved, enabling a more meaningful performance comparison than a static budget.

Question 4

In budgeting, what does 'sensitivity analysis' examine?

Accepted Answer

How changes in key assumptions affect projected financial outcomes

Answer

Sensitivity analysis tests how financial projections change when key assumptions such as sales volume, pricing, or costs are varied from their base-case estimates.

Question 5

What is 'capital budgeting'?

Accepted Answer

The process of evaluating and selecting long-term investment projects

Answer

Capital budgeting is the process of analyzing and deciding which long-term investments — such as equipment, facilities, or acquisitions — are worth undertaking.

(CA) Chartered Certified Accountant Practice Test

(CA) Chartered Certified Accountant Practice Test

CA CA Budgeting & Forecasting 2