1. The pro forma income statement gives managers an advance estimate of a compan

Question

1. The pro forma income statement gives managers an advance estimate of a company's profitability.

true or false

2. Pro forma financial statements are prepared at the end of the year and are used to evaluate the performance of managers.

true or false

3. The marketing department is primarily responsible for establishing the sales forecast. true or false

4. If a financial statement is labeled "pro forma" this means that the statement was prepared by a professional accountant (usually the firm's auditor) following a prescribed format.

True

False

5. Vector Company seeks input from salespeople regarding the number of units they believe they can sell during the upcoming budget period. This is an example of participative budgeting. true or false

6. One advantage of participatory budgeting is that it frees up upper management for more important tasks.

true or false

7.Janice was questioned recently about her department's spending in excess of the budget. This is an example of using the budget for performance measurement. true or false

8. Strategic planning deals with the establishment of a long term company objectives. true or false

Explanation / Answer

Question 1

FALSE
Pro forma income statement in addition to the income statement prepared in accordance with the GAAP is prepared to provide investors with clear visibility about the performance of the company by excluding all the one-time charges in its income statement.

Question 2

FALSE

Pro forma financial statements are prepared at the end of the year. However, the objective is not to assess the performance of the managers but to give insight to the investors on the operating performance of the company.

Question 3

TRUE

Marketing department is closely associated with the selling the product of the company and is therefore in a position to provide better sales forecast.

Question 4

FALSE

The pro forma financial statement is prepared by the management of the company and is prepared as per its own format.

Question 5

FALSE
Participatory budgeting is a process where the budget is prepared by taking inputs from different people in the organization.

Question 6

FALSE

Participatory budgeting requires significant time of the senior management as they have to take the views of different people.

Question 7

TRUE

Under the performance measurement the budget used by the department is also monitored

Question 8

TRUE

Strategic planning is to determine the long term plans of the company

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