Question

Which of the following are often left out of most financial planning models?

a) Contingency expenses
b) Fixed assets
c) Variable costs
d) Operating income

Answer 1

Contingency expenses are frequently overlooked in financial planning models due to their unpredictable nature, even though they are crucial for a complete assessment of financial health.

Step-by-step explanation:

When considering financial planning models, certain elements might be overlooked or not prioritized, which can result in an incomplete picture of an individual's or organization's financial health and preparedness. Among the options provided, a) Contingency expenses are often the most neglected in financial planning. These expenses are essentially potential costs that could arise from unforeseen events or emergencies, such as medical bills, urgent repairs, or natural disasters. While fixed assets, variable costs, and operating income are typically accounted for in financial statements and budgeting plans, contingency expenses are less predictable and, therefore, might be omitted or underestimated.