QUESTION 10 Which of the following statements about the process of forecasting a firm's pro forma Financial Statements is NOT true? O 1. In developing the pro forma Financial Statements, it is important to have some accounts that expand or contract in response to changes in activities 2. In developing the proforma Financial Statements, it is important to understand both the market for the firm's products and the firm's marketing plan 3. Following the development of sales forecasts, one of the next critical steps is to forecast the firm's asset turnover ratio (ATO) 4. Forecasts of the firm's future activities should be conservative to ensure that the value of the firm is not overstated QUESTION 11 Which of the following statements about the process of forecasting a firm's pro forma Financial Statements is TRUE? O 1. The focus of the forecasting process should be on the firm's transitory (core) earnings O 2. The best approach to forecasting a firm's future sales is to use its historical growth in sales 3. Without an enduring competitive advantage, a firm's abnormal earnings (residual income) will ultimately decline O 4. If a firm's net financial obligations (NFO) increases, its shareholders' equity (S/E) must decrease because NOA = NFO + S/E