The weakness of the judgmental approach to preparing a pro forma balance sheet is
A) the assumption that the values of certain accounts can be forced to take on desired levels.
B) ease of calculation and preparation.
C) the assumption that the firm's past financial condition is an accurate predictor of its future.
D) the assumption that the firm faces linear total revenue and total operating cost functions.

Question

Quizplus · Accepted Answer

The judgmental approach assumes that certain accounts can be manipulated to achieve desired levels, which may not be a realistic assumption in practice. This approach relies heavily on subjective estimates and assumptions, which may lead to inaccuracies in the pro forma balance sheet.

The Weakness of the Judgmental Approach to Preparing a Pro