Forecasting Financial Statements

Question 1

Which of the following statements regarding pro forma financial statements is NOT correct?

A Pro forma financial statements can be used to adjust past performance for non-GAAP numbers

B Pro forma financial statements must follow GAAP

C Pro forma financial statements are used to project future expected performance

D Pro forma financial statements do not follow GAAP

Answer 1

B

Question 2

All of the following are assumptions considered in preparing pro forma financial statements EXCEPT:

A Interest rates

B Growth rates

C Historic growth rates

D Expected costs

Answer 2

C

Question 3

In using pro forma financial statements to project future performance, which of the following items is typically estimated first?

A Costs

B Assets

C Liabilities

D Revenue

Answer 3

D

Question 4

Which financial ratios can be used to project the level of financing needed based on estimated assets?

A Debt-to-asset ratio and financial leverage ratio

B Financial leverage ratio and asset turnover ratio

C Debt-to-asset ratio and asset turnover ratio

D Asset turnover ratio and return on assets ratio

Answer 4

A

Question 5

Which method of preparing cash flow statements is used when completing pro forma financial statements?

A Percent-of-asset method

B Indirect method

C Balance sheet method

D Direct method

Answer 5

B