CFA Level I · CFA Level I Exam · Capital Investments and Capital Allocation
A company's analyst finds that actual cash flows from a completed project were well below the original forecast. The capital budgeting activity that most likely helps identify systematic forecasting bias across projects is the:
The post-audit most likely identifies systematic forecasting bias. It compares actual project results with the original forecasts, exposing consistent over-optimism or errors and improving future estimates and operations. Sensitivity analysis occurs before approval, and capital rationing concerns limited funds rather than forecast accuracy.
- Apost-auditCorrect
- Bsensitivity analysis
- Ccapital rationing review
Explanation
A post-audit compares actual results with projections, revealing biases and weaknesses in forecasting and improving future estimates. Sensitivity analysis is done before approval, and capital rationing concerns limited funds.
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