Which of the Following Statements Is Correct

question 76

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 balance sheet forecasting method produces accurate results when fixed assets are lumpy and when economies of scale are present.

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Definitions:

Heterogeneity

The quality or state of being diverse in character or content; having components or qualities that are different from each other.

Regulatory Mechanisms

The systems, rules, and procedures established to control, guide, or manage behaviors and processes within organizations or bodies.

Stability and Predictability

The degree to which circumstances are consistent and foreseeable over time, fostering a sense of security and reliability.

Norms

Socially accepted rules that govern behavior within a group or society.