According to the textbook, the most important function of the pro forma statement of cash flows is to project whether the firm will have sufficient ________.
A) income to meet its payroll on a weekly or monthly basis
B) income to exceed industry norms
C) cash to meet its needs
D) inventory to meet its sales and production forecasts
E) short-term assets to cover its short-term liabilities

Question

Quizplus · Accepted Answer

The pro forma statement of cash flows is designed to project the amount of cash the firm will have on hand in the future. This enables the firm to determine whether it will have enough cash to meet its needs, such as paying bills or investing in new projects. While income is important, it is not the primary focus of the statement of cash flows. Similarly, exceeding industry norms or meeting sales and production forecasts may be important, but they are not directly related to the firm's cash position. Finally, short-term assets and liabilities are included in the statement of cash flows, but the primary goal is to assess overall cash availability.

According to the Textbook, the Most Important Function of the Pro