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One Basic Weakness of the Simplified Pro Forma Approaches Lies

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One basic weakness of the simplified pro forma approaches lies in the assumption that the firm's past financial condition is an accurate indicator of its future.


Definitions:

Agreement in Principle

An initial acceptance indicating a preliminary agreement before the details are finalized.

Binding Contract

An agreement between two or more parties that is legally enforceable in a court of law.

Verbal

Pertaining to words or spoken communication, often used in the context of agreements or contracts.

Written Contract

A formal agreement between two or more parties that is fully documented and signed, outlining specific obligations and terms.

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