A Weakness of the Percent-Of-Sales Method of Preparing a Pro

question 27

Multiple Choice

A weakness of the percent-of-sales method of preparing a pro forma income statement is ________.

• A) that it forecasts income and then expresses the various income statement items as percentages of projected income.
• B) the assumption that the firm faces linear total revenue and total operating cost functions
• C) the assumption that the firm's past financial condition is an accurate predictor of its future
• D) the difficulty faced in calculation and preparation of such statements

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