Question: Question content area top Part 1 The two main weaknesses of pro forma financial statements are _ _ _ _ _ _ _ _ .

Question content area top

Part

1

The two main weaknesses of pro forma financial statements are

________.

Question content area bottom

Part

1

.

stockholders take the pro forma forecasts too

seriously, which causes volatility in stock prices when actual outcomes deviate from forecasts

.

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

.

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

.

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

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