Which type of statements about the future are particularly important for firms to consider when making decisions?

• A. Normative statements, because they express opinions about what should happen.
• B. Prescriptive statements, because they provide legal requirements.
• C. Descriptive statements, because they summarize past events.
• D. Positive statements, because they describe what is likely to happen based on factual analysis.

Answer: (D)

Verified step by step guidance

1. Understand the difference between types of statements: Normative statements express opinions about what should happen, Prescriptive statements provide legal or regulatory requirements, Descriptive statements summarize past events, and Positive statements describe what is likely to happen based on factual analysis.
2. Recognize that firms need to make decisions based on predictions about the future, which requires objective and evidence-based information rather than opinions or past summaries.
3. Identify that Positive statements are important because they are testable and based on factual data, allowing firms to forecast outcomes and make informed decisions.
4. Note that Normative statements, while important for policy discussions, do not provide factual predictions and thus are less useful for firm decision-making about the future.
5. Conclude that firms rely on Positive statements to anticipate future market conditions, costs, and revenues, which are critical for strategic planning and resource allocation.