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) the assumption that the firm faces linear total revenue and total operating cost functions
C) the assumption that the firm's past financial condition is an accurate predictor of its future
D) ease of calculation and preparation

Question

Quizplus · Accepted Answer

The weakness of the judgmental approach is that it assumes that the values of certain accounts can be forced to take on desired levels, which may not be realistic or possible in practice. This approach relies heavily on subjective judgment, which may lead to errors or biases in the preparation of the pro forma balance sheet.

The Weakness of the Judgmental Approach to Preparing a Pro