Which of the Following Statements Is Correct

question 88

Multiple Choice

Which of the following statements is 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) All else equal, if a firm operates at full capacity, the greater its payout ratio, the less additional funds that will be needed for a particular growth in sales.
• E) The projected statement of financial position forecasting method produces accurate results when fixed assets are lumpy and when economies of scale are present.