Lesson 3
Chapter 4 Questions 1 & 5
Chapter 4 Problems 2, 8, 19 or problems 4, 10, 23.
1. What are the basic benefits and purposes of developing pro forma statements and a cash
budget? (LO1, LO2)
A. Allows you to project and anticipated of profits for the upcoming period(s)
B. The pro-forma financial statements and cash budget helps to determine future level of asset
needs and the financing that’s needed.
C. Lenders such as bankers may use the financial statements to help with their decision making
of giving regarding getting loans.
5. Rapid growth in sales and profits can cause financing and other problems. Elaborate on
this statement. (LO4)
As a company grows it needs to invest in new projects which will require additional funds.
Therefore rapid growth requires lots of investment. It is for this reason that rapid growth in sales
