The most common approach to developing pro forma financial statements is called the cash budget method. financial planning method. seasonality approach. percent-of-sales method. market-oriented approach. None of the options are correct.

Question

Carsen Forbes

Business

12 May, 08:18

The most common approach to developing pro forma financial statements is called the cash budget method. financial planning method. seasonality approach. percent-of-sales method. market-oriented approach. None of the options are correct.

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Answers (1)

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Mylee Lee · Answer 1

The correct answer is letter "D": percent-of-sales method.

Explanation:

The percentage-of-sales method is the fastest approach to develop a budget based on the financial statements. Expenses are compared to the net sales as percentages to be applied in the sales level for the budgeted period. However, to compare expenses to the items in the budget, the expense must be correlated to the item causing an issue because fixed expenses cannot be linked with sales, for instance.