Which of the Following Statements About Pro Forma Financial Statements

question 3

Multiple Choice

Which of the following statements about pro forma financial statements is incorrect?

• A) Pro forma financial statements are projections for future periods based on forecasts.
• B) Pro forma financial statements are typically completed for two to three years into the future.
• C) Pro forma financial statements are required by the SEC.
• D) Most companies consider their pro forma financial statements to be confidential and reveal them to outsiders only on a "need to know basis."
• E) Pro forma financial statements are strictly planning tools.

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Definitions:

Nominal Rate

The stated interest rate of a bond or loan, without accounting for compounding or inflation.

Mortgage Loan

A loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty.

Compounded Monthly

A method where the interest is calculated on a monthly basis and added to the principal sum, allowing the interest to grow over time through compounding.

Quarterly Payments

Payments that are made four times a year, often on a financial obligation like a loan or lease.