1. The two main weaknesses of pro forma financial statements are ________.

A. they produce inaccurate forecasts and they cannot be used by anyone outside the firm

B. pro forma statements provide useful forecasts of profits, but not cash flows, and they rely too much on the assumption that income statement items will grow at the same rate as sales

C. stockholders take the pro forma forecasts too seriously, which causes volatility in stock prices when actual outcomes deviate from forecasts

D. they assume that the firm's past financial condition is an accurate indicator of its future and that managers can force particular accounts to take on particular desired values

2.

Table 4.3 The financial analyst for Sportif, Inc. has compiled sales and disbursement estimates for the coming months of January through May. Historically, 75 percent of sales are for cash with the remaining 25 percent collected in the following month. The ending cash balance in January is $3,000. Month Sportif, Inc. Disbursements Sales January $ 5,000 $6,000 February 6,000 $7,000 March 10,000 $4,000 April 10,000 $5,000 May 10,000 $5,000 The firm has a negative net cash ow in the month(s) of . (See Table 4.3) MACRS RATE Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 10% 2 45 32 25 18 3 15 19 18 14 4 7 12 12 12 5 12 9 9 6 5 9 8 7 9 7 8 4 6 9 6 10 6 11 4 Under MACRS, an asset which originally cost $10,000 is being depreciated using a 5-year normal recovery period. What is the depreciation expense in year 3? Balance Sheet General Talc Mines December 31, 2021 Assets Cash $ 25,000 Accounts receivable 120,000 Inventories 300,000 Total current assets $ 445,000 Net fixed assets $ 500,000 Total assets $ 945,000 Liabilities and stockholders' Accounts payable $ 80,000 Notes payable 350,000 Accruals 50,000 Total current liabilities $ 480,000 Long-term debts 150,000 Total liabilities $ 630,000 Stockholders' equity Common stock 180,000 Retained earnings 135,000 Total Stockholders' equity $ 315,000 Total liabilities and stockholders' equity $ 945,000