Final answer:
Pro forma income statements are indeed based on a sales forecast and a production plan because these documents predict future revenues and expenses and provide a basis for financial decision-making.
Step-by-step explanation:
The statement that pro forma income statements follow a sales forecast and a production plan is True. A pro forma income statement is a financial report that companies use to project future revenues and expenses, often to forecast the impact of potential business decisions, such as expansions or acquisitions.
Creating a pro forma income statement typically begins with a sales forecast, which estimates future sales revenue over a given period. Based on that forecast, a production plan is developed to determine the costs of goods sold, required materials, labor, and overhead costs.
With these figures, companies can create a pro forma income statement that predicts net income by subtracting projected expenses from projected revenue.
Pro forma income statements are financial statements that project future income and expenses based on certain assumptions and forecasts. They are often used to estimate future profitability and assess the financial feasibility of a business plan. In this case, pro forma income statements are based on a sales forecast and a production plan.
The sales forecast predicts the expected sales volume and revenue, while the production plan outlines the anticipated production levels and costs.