The primary purpose in preparing pro forma financial statements is
A) for risk analysis.
B) to ensure the ability to pay dividends.
C) for profit planning.
D) for cash planning.

Question

Quizplus · Accepted Answer

The primary purpose of preparing pro forma financial statements is for profit planning. Pro forma financial statements are prepared to estimate the financial performance of a company in the upcoming period. These statements can help management make decisions about future operations and identify potential areas for improvement. Profit planning is an essential part of a company's overall financial management strategy. While pro forma financial statements can be useful for cash planning and risk analysis, their primary purpose is to aid in profit planning. Ensuring the ability to pay dividends is important but is not the primary purpose of pro forma financial statements.

The Primary Purpose in Preparing Pro Forma Financial Statements Is