What is important to understand about the label "pro forma"?
A)Pro forma refers to GAAP-based financial statements.
B)Pro forma requires firms to present two distinct net profit amounts in their Form 10-Ks.
C)Pro forma relates to the amount of debt in a firm's capital structure.
D)Pro forma earnings or financial statements are sometimes based on a firm's own definition which is not technically a correct definition.

Question

Quizplus · Accepted Answer

Pro forma earnings or financial statements may include adjustments or exclusions that are not in accordance with GAAP standards, making them potentially misleading. It is important to carefully scrutinize the assumptions and methodology used in pro forma statements before relying on them for investment decisions.

What Is Important to Understand About the Label "Pro Forma