Which of the Following Is the Initial and Most Important

question 13

Multiple Choice

Which of the following is the initial and most important step in the preparation of pro forma financial statements?

• A) Estimate the levels of investment in current and fixed assets.
• B) Determine the rate of interest that will be required for borrowed funds.
• C) Project the firm's sales revenues for the planning period.
• D) Approximate the cost of raw materials.

---

Definitions:

Accounts Receivable

Payables to a company from clients for the use or delivery of goods or services, not yet reimbursed.

Inventory

The raw materials, work-in-process products, and finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

Mortgage Notes Payable

A liability represented by a legal document indicating the amount owed on a mortgage, including terms for repayment and interest rates.

Financing Activity

Transactions related to raising capital and repaying investors, including issuing equity, taking out loans, and distributing dividends.