Which of the Following Statements Is Most Correct

question 4

Multiple Choice

Which of the following statements is most correct?

• A) One of the key steps in the development of pro forma financial statements is to identify those assets and liabilities which increase spontaneously with net income.
• B) The first, and most critical, step in constructing a set of pro forma financial statements is establishing the sales forecast.
• C) Pro forma financial statements as discussed in the text are used primarily to assess a firm's historical performance.
• D) The capital intensity ratio reflects how rapidly a firm turns over its assets and is the reciprocal of the fixed assets turnover ratio.
• E) The percentage of sales method produces accurate results when fixed assets are lumpy and when economies of scale are present.

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Definitions:

Legal Maximum

A legally established upper limit on the price that can be charged for a good or service.

Good Sold

A product that has been sold to a customer, transferring ownership from the seller to the buyer.

Binding Price Ceiling

A Binding Price Ceiling is a government-imposed limit on the price charged for a product or service that is set below the market equilibrium, leading to shortages.

Treadmills

Exercise equipment designed for walking or running in place, often used in fitness routines to improve cardiovascular health.