One basic weakness of the simplified pro forma approaches lies in the assumption that the firm's past financial condition is an accurate indicator of its future.

Question

Quizplus · Accepted Answer

The statement is true. Simplified pro forma approaches rely heavily on past financial data to make projections about the future. However, it is possible that unforeseen changes in the market, economic conditions or internal operations of the firm could impact its financial performance in ways that were not evident from the past financial data. Therefore, it is important to use pro forma analysis as a tool for guidance, rather than relying solely on it to make decisions.

One Basic Weakness of the Simplified Pro Forma Approaches Lies