9. Which of the following best describes pro-forma financial statements? A: Anal
ID: 2596810 • Letter: 9
Question
9. Which of the following best describes pro-forma financial statements?
A: Analysis of projected sales revenue, operating forecast, and variable costs to determine break-even sales volume
B: A projected balance sheet, income statement, and cash flow statement prepaid “as if” certain and predictions about the future came true
C: Ratio analysis, focused on how key performance metrics change over time
D: A sales forecast, expecting budget and cash budget prepared to forecast the need of external financing
E: All of the above describe pro forma financial statements
Explanation / Answer
Option B: A projected balance sheet, income statement, and cash flow statement prepared "as if" certain predictions about the future came true best decribes pro-forma financial statements.
A pro-forma financial statement is one based on certain assumptions and projections. If a corporation wants to see the effect of ceratin predictions or projections, then believing those assumptions to be true, it prepares a pro-forma financial statement incorporating those predictions.
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