Common Approach in Financial Planning

Question:

In the MicroDrive analysis, they chose a forecasting framework as part of their financial planning process. A common approach in the financial planning process involves using the

A) status quo method.

B) forecasted financial statements (FFS) method.

C) pro forma financial statements method.

D) historical financial statements method.

Answer:

c. pro forma financial statements method.

Explanation: In financial planning, the pro forma financial statements method is commonly used. This approach involves creating projected financial statements based on assumptions about future business conditions and strategies. It helps in forecasting future financial performance and planning accordingly.