A pro forma statement indicates that both sales and fixed assets are projected to increase by 7 percent over their current levels

When utilizing the percentage of sales approach, managers: I. estimate company sales based on a desired level of net income and the current profit margin. II. consider only those assets that vary directly with sales. III. consider the current production capacity level. IV. can project both net income and net cash flows.    A.  I and II only B.  II and III only C.  III and IV only D.  I, III, and IV only E.  II, III, and IV only

17.

Which one of the following is correct in relation to pro forma statements?    A.  Fixed assets must increase if sales are projected to increase. B.  Net working capital is affected only when a firm's sales are expected to exceed the firm's current production capacity. C.  The addition to retained earnings is equal to net income plus dividends paid. D.  Long-term debt varies directly with sales when a firm is currently operating at maximum capacity. E.  Inventory changes are directly proportional to sales changes.

18.

When constructing a pro forma statement, net working capital generally:    A.  remains fixed. B.  varies only if the firm is currently producing at full capacity. C.  varies only if the firm maintains a fixed debt-equity ratio. D.  varies only if the firm is producing at less than full capacity. E.  varies proportionally with sales.

19.

A pro forma statement indicates that both sales and fixed assets are projected to increase by 7 percent over their current levels. Given this, you can safely assume that the firm:    A.  is projected to grow at the internal rate of growth. B.  is projected to grow at the sustainable rate of growth. C.  currently has excess capacity. D.  is currently operating at full capacity. E.  retains all of its net income.