1. Which one of the following is correct in relation to pro forma statements?

a. Inventory stays the same no matter how much sales changes.

b. Net working capital is affected only when a firm's sales are expected to exceed the firm's current production capacity.

c. The addition to retained earnings is equal to net income plus dividends paid.

d. Fixed assets must increase if sales are projected to increase and the firm is currently operating at full capacity.

e. Long-term debt varies directly with sales when a firm is currently operating at maximum capacity.

2. Joe is expected to develop a financial plan for his company. Thus, he needs to consider :

I. Will the products be sold in India?

II. How much net working capital will be needed?

III. How to distribute the products to the customers?

IV. How many customers to whom the firm's products are sold?

I and IV only

I, II, III, and IV

I only

II, III, and IV only

II only

3. Common source(s) of cash to an operating firm include :

I. decrease in accounts receivable

II. decrease in notes payable

III. increase in common stock

IV. decrease in accounts payable

V. decrease in inventory

II and IV only

II, III and V only

I, III and V only

I, II, III, IV and V

I, IV and V only