The accrual accounting system is the standard system used by most businesses and is also the system used in the simulation. Considering the rules of accrual accounting consider the following questions:
How does the accrual accounting system impact the financial statements—and the simulation standing positions—of firms such that these might not reflect the true, long-term sustainability of the firms’ strategies?
What is being “unaccounted” for?
What contrasts are there between what is shown in cash flow statements and the need for firms to borrow at high rates and firms’ income statements?
2. One of the key tools in the simulation and in most businesses today is a demand forecasting model. Using one effectively is critical to reducing the risk for a firm. Considering the forecasting that your team does for the simulation, answer the following:What are some of the major challenges in setting demand forecasts in the simulation?How does “what if” forecasting increase the power of the demand forecasting model?
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