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    Why use cash to plug figures in a pro forma projection.

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    Why does it make sense to let the firm's cash balance or a short-term liability account serve as the plug figure in pro forma projections? Why not use gross fixed assets as the plug figure?

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    Solution Preview

    Here are some reasons why cash would be plugged to balance pro-forma financial statements:

    1. The plug undoubtedly really belongs in current assets in cash, accounts receivable or inventory. If the plug is a negative amount, a current liability account such as accounts payable makes the most sense for ...

    Solution Summary

    The solution give four reasons why the cash account or a current liability account is the most reasonable place to 'balance' a pro forma projection.