Which of the following is the first step involved in constructing pro forma financial statements?
A) Forecasting the next period's balance sheet
B) Determining the additional funds needed (AFN) to support expected growth
C) Forecasting the income statement
D) Implementing the financing feedbacks
E) Determining the operating breakeven point

Question

Quizplus · Accepted Answer

The first step involved in constructing pro forma financial statements is forecasting the income statement, as it lays the groundwork for all subsequent calculations and projections. This involves forecasting revenues, expenses, and taxes for the coming period. Once the income statement is forecasted, the other financial statements can be constructed using the assumptions and projections made in the income statement.

Which of the Following Is the First Step Involved in Constructing