Unbiased cash flow forecasts are often difficult to obtain due to ________, which, despite causing higher projected cash flows, can also increase effort, commitment, and persistence from employees.

Respuesta :

The answer us overoptimism.

Corporate investment policies can be distorted by managerial optimism, which makes it reliant on internal cash flow. Managers are optimistic when they consistently overestimate the chance of excellent company performance while underestimating the probability of poor firm performance.

Being too optimistic might lead to impracticality and arrogance. Optimists overestimate returns and generate overly optimistic cash flow estimates, which leads to higher investment levels and increased sensitivity of investment decisions to cash flow.

Therefore, the blank will be filled by overoptimism since it makes the cash forecast difficult to obtain. This becomes a hinderance in reliable forecasting.

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