Question

Mariana wants to analyze the potential viability of a new business idea. She does this by researching the sales levels of existing businesses similar to her projected business. She analyzes the information to predict sales levels that can be expected for her business at various stages of its growth. In this scenario, Mariana develops a___________.

A. sensitivity analysis.
B. break-even analysis.
C. pro forma income statement.
D. pro forma balance sheet.

Answer 1

C. Pro forma income statement

Step-by-step explanation:

Mariana develops pro forma income statement in order to analyze the potential viability of a new business idea by using data from existing business. She uses the sales data existing business to forcast the sales of the new business idea.

Pro forma income statement: It is also known as " pro forma profit and loss". It can be defined as a statement prepared by firms to forcast expected revenue and expenditure by assuming growth rate of the firm, size of the market and the existence of competition. It simply refers to a method of calculating financial results using certain assumptions.

Pro forma income statement can be used to presume the revenue, expenditure, profit and loss of a firm in the future.

Types of people forma income statement

1. Pro Forma of Historical Profit and Loss Statement.

2. Pro forma projections of Income.

Answer 2

C. Pro Forma Income statement

Step-by-step explanation:

Pro forma income statement is an estimated income statement. It is a projected income statement created by organizations aimed at preparing both forecast income which is money they hope to recieve and forecast expenditures which are money they expect to spend with considerations of various conditions like market, competition and so on for an estimated period. They are income statements that shows "what ifs" rather than the real income statement. By predicting sales level and so on, Mariana prepare a pro forma income statement.