1215

Which of the following financial statement items is least likely proportional to sales in a sales-driven pro-forma financial statement?

A) Interest expense.

B) Operating margin.

C) Selling, general and administrative expenses.

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Interest expense is usually forecast based on current payments on long-term debt and expected future long-term debt.

1215

Which item is least likely assumed to be a constant percentage of sales on a pro forma balance sheet?

A) Property, plant and equipment.

B) Inventory.

C) Long-term debt.

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The projected level of long-term debt will depend on the financing need or surplus that results from the net income projection and the assumptions about how the surplus will be used or the need will be financed. Current assets, long-term assets, and current liabilities are all more likely to grow proportionately with sales.