Which of the Following Is the First Step Involved in Constructing

question 4

Multiple Choice

Which of the following is the first step involved in constructing pro forma financial statements?

• A)Forecasting the next period's balance sheet.
• B)Determining the additional funds needed (AFN) to support expected growth.
• C)Forecasting the income statement.
• D)Determining financing feedbacks.
• E)Computing the firm's operating breakeven point.

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Definitions:

Inflation

The growth rate of general prices for goods and services, which sequentially leads to a reduction in the ability to make purchases.

Unemployment

The situation when individuals who are capable of working and are actively seeking work are unable to find employment.

Marginal

Pertaining to small changes or differences in a firm's output or in the amount of a product consumed, often related to decisions about whether to increase or reduce production or consumption.

Trade-off

A trade-off involves a sacrifice that must be made to obtain a certain product, service, or experience, understanding that choosing one option usually means forgoing another.