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Which of the following statements about the process of forecasting a firms pro forma Financial Statements is TRUE? 1. One of the critical challenges in

Which of the following statements about the process of forecasting a firms pro forma Financial Statements is TRUE? 1. One of the critical challenges in developing the pro forma Financial Statements is that of circularity 2. It is impossible for a firm to change its asset turnover (ATO) ratio and hence there is no need to forecast the ATO 3. If the firms industry and the way in which the external environment affects the industry are understood, there is no need to consider how macroeconomic factors affect the firm directly 4. Over time, all companies will reach a steady state where their sales growth and performance measures flatten out

Which of the following statements about the process of forecasting a firms pro forma Financial Statements is NOT true? 1. If a firm wishes to grow at a rate in excess of its sustainable growth rate, g*, its only option is to raise additional external financing 2. The focus of the forecasting process should be on the firms sustainable (core) earnings 3. In the ideal, year-by-year forecasts should be made up until the point in time when the firm reaches a steady state growth rate 4. A firms sustainable growth rate is based on its current level of profitability and its current dividend policy

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