Question 1

A pro forma statement uses the prior year's financial statements to find the relationship or relative percentage of each line (accounting category)to either the sales revenue or the total assets of the firm.

Accepted Answer

A pro forma statement does indeed use the prior year's financial statements to analyze the relationship of each line item to sales revenue or total assets.

Question 2

A pro forma statement sets out the financial predictions of a company on an "as if" basis-that is,it projects future performance based on a set of operating and sales facts.

Accepted Answer

The answer of A pro forma statement sets out the...

Question 3

Pro forma statements are tools used by the company to help highlight areas that the company needs to avoid as part of its short-term financial planning.

Accepted Answer

Pro forma statements are used for planning and projecting future financial performance, not specifically to highlight areas to avoid. They help in setting goals and making strategic decisions for growth and profitability.

Question 4

Name three things that a pro forma income statement can tell us.

Accepted Answer

The answer of Name three things that a pro forma...

Question 5

When estimating the impact of a capital project on a pro forma balance sheet,one should note that financing can come from a variety of sources.The resources can include new debt,increases in current liability accounts,and cash retained through operations.

Accepted Answer

When estimating the impact of a capital project on a pro forma balance sheet, one should consider the different sources of financing available, such as new debt, increases in current liability accounts, and retained earnings from operations. Therefore, the statement is true.

Question 6

Pro forma statements are tools used by the company to monitor its profitability and obligations for the previous and/or current year.

Accepted Answer

Pro forma statements are forward-looking financial statements that present a company's financial data under certain assumptions or hypothetical scenarios, primarily used for planning and decision-making, rather than monitoring past performance.

Question 7

Pro forma statements are tools used by the company to forecast its profitability and obligations for the coming year.

Accepted Answer

Pro forma statements are indeed used by companies to forecast their financial performance and obligations for the upcoming period. These statements incorporate assumptions and estimates based on various factors such as market trends, historical data, and management's expectations. Pro forma statements can help companies to make informed decisions about future investments, financing needs, and strategies.

Question 8

When estimating the impact of a capital project on a pro forma balance sheet,one should note that financing can come from a variety of sources.The resources can include increases in current assets and long-term assets.

Accepted Answer

Financing for a capital project typically involves sources of funds such as debt, equity, or retained earnings, rather than increases in current assets or long-term assets, which are uses of funds.

Question 9

What does a pro forma statement do? On what inputs does a pro forma statement rely?

Accepted Answer

The answer of What does a pro forma statement do?...

Quiz 12: Forecasting and Short-Term Financial Planning