A weakness of the percent‑of‑sales method to preparing a pro forma income statement 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.
Answer:C
A weakness of the percent‑of‑sales method to preparing a pro forma income statement 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.