You Constructed a Pro Forma Balance Sheet for Next Year

question 22

Multiple Choice

You constructed a pro forma balance sheet for next year and found that external financing required was negative (i.e. ,the company projected a financing surplus) .Which of the following options,all else equal,would NOT correct the projected imbalance?

• A) A stock repurchase
• B) A decrease in accounts payable
• C) An increase in cash and marketable securities
• D) An increase in the retention ratio

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Definitions:

Expense Account

An account that records the costs incurred by a business in the process of earning revenue, part of the company's income statement.

Adjusting Entry

A record added in the books at the closing of an accounting cycle to note any unrecorded earnings or expenditures during that time.

Rent Revenue

Income received from leasing out properties or spaces to tenants.

Liability-Revenue Relationship

The association between a company's liabilities and its ability to generate income, impacting financial performance.