Pro Forma Analysis net, statements, interest, relation

hinsafdar

Typically, the first step in developing pro forma financial statements for a firm is to:

A: forecast revenue growth
B: establish the firm's tax and interest burdens
C: forecast next period's net income and dividend payout

My answer : B
Schwesser: A

Volume 4 clearly states that the first step is:
"1. estimate typical relation b/w revenues and sales driven accts
2. estimated fixed burdens such as interest and taxes
3. forecast revenues
4. ......."

What do you guys think?

Micholien

I think this is one grey area. The notes list the 4 steps, but the example given starts off with sales forecast.

trogulj

A

Read volume 4 here carefully

dece2011

The entire pro forma analysis is based on the forecasted revenue growth. So, basically, once you get to forecasting, it is implied that you have already decided on the assumptions to use (such as tax/interest burden).

__________

"good personality ... or he was known as Lt. Mandingo during his army days."

Jolyn

Yes, I also recall the same.