27. You are getting ready to prepare pro forma statements for your business. Whi
ID: 2808581 • Letter: 2
Question
27. You are getting ready to prepare pro forma statements for your business. Which one of the following are you most apt to estimate first as you begin this process? a. fixed assets b. current expenses c. sales forecast d. projected net income e. external financing need 28. The formula which breaks down the return on equity into three component parts is referred to as which one of the following? a. equity equation b. profitability determinant c. SIC formula d. Du Pont identity e. equity performance formula 29. On a common-size balance sheet all accounts are expressed as a percentage of: a. sales for the period. b. the base year sales. c. total equity for the base year. d. total assets for the current year. e. total assets for the base year. 30. Last year, which is used as the base year, a firm had cash of $52, accounts receivable of $218, inventory of $509, and net fixed assets of $1,107. This year, the firm has cash of $61, accounts receivable of $198, inventory of $527, and net fixed assets of $1,216. What is the common-base year value of accounts receivable? a. 0.08 b. 0.10 c. 0.88 d. 0.91 e. 1.18 LaExplanation / Answer
Answer 27 : C sales Forecast.
Sales forecast is the first step to preform pro forma statement for any business.
Answer 28: d. Du Pont identity
Du pont analysis break ROE formula in to three part – ROE = Net income/Total equity
= (net income/ sales)*(sales/Total asset)*(Total asset/Total equity)
=Net income margin*asset turnover * equity multiplier
Answer 29: d. total asset for the current year
Common size balance sheet express all item of balance sheet as a % of current year total asset.
Answer 30: option d = 0.91
Under common base year value we have to divide current year value by base year value.
Current year AR = 198
Base year AR = 218
Common base year AR = 198/218 = 0.91
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