Which of the following is the first step involved in constructing pro forma financial statements?
A)Forecasting the next period's balance sheet.
B)Determining the additional funds needed (AFN) to support expected growth.
C)Forecasting the income statement.
D)Determining financing feedbacks.
E)Computing the firm's operating breakeven point.

Question

Quizplus · Accepted Answer

Forecasting the income statement is the first step involved in constructing pro forma financial statements. This involves estimating the expected revenues and expenses for the next period based on historical data, industry trends, and other relevant factors. Once the income statement is forecasted, it can be used to project the firm's future cash flows, which can then be used to construct pro forma balance sheets and cash flow statements.

Which of the Following Is the First Step Involved in Constructing