Final answer:
It is true that the sales budget should be prepared before developing the pro forma income statement.
Step-by-step explanation:
The statement that the sales budget should be prepared before developing the pro forma income statement is True. The sales budget is a crucial part of financial planning as it estimates the expected revenue from sales and serves as the foundation for other budget elements, including production, material purchases, labor, and overhead costs.
All of these factors are necessary to develop a comprehensive pro forma income statement, which is a projection of the company's future income. The pro forma income statement relies on accurate sales budget figures to predict net income accurately.
Without the sales budget, the pro forma income statement would lack the necessary starting point for all other budget forecasts, which could lead to unrealistic income projections. Hence, preparing the sales budget first ensures that the revenue assumptions align with the other financial activities and strategies of the business.