BUISENESS MANAGEMENT
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the prior year’s income statement
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sales projections and the production plan
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the cash budget
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the cash budget and prior year’s income statement
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Detailed explanation-1: -Pro forma financial statements are projections of future expenses and revenues, based on a company’s past experience and future plans.
Detailed explanation-2: -In constructing pro forma statements, a company recognizes the uniqueness and distinct financial characteristics of each proposed plan or project. Pro forma statements allow management to: Identify the assumptions about the financial and operating characteristics that generate the scenarios.
Detailed explanation-3: -Pro forma financial statements are financial reports based on hypothetical scenarios that utilise assumptions or financial projections. They are useful tools that business owners, investors, creditors, or decision-makers can use to examine different iterations of future events based on certain financial assumptions.
Detailed explanation-4: -A pro forma income statement in business plan is the statement prepared by the business entity to prepare the projections of income and expenses, which they expect to have in the future by following certain assumptions such as competition level in the market, size of the market, and growth rate, etc.