When preparing pro forma income statements, which one of the following items is least
likely to be sales driven?
A. Current assets.
B. Interest expense.
C. Administrative expenses.
Ans: B.
Interest expense is considered a fixed burden and a function of a firm’s capital structure, not sales.
A is incorrect. Current assets are normally a sales driven account.
C is incorrect. Administrative expenses, although they may contain fixed costs, are primarily sales driven.
14. Which of the following pairs of general categories are least likely to be considered in the formulas used by credit rating agencies to determine the capacity of a borrower to repay a debt?
A. Operational efficiency; leverage.
B. Margin stability, availability of collateral.
C. Leverage; scale and diversification.