A group of students are preparing for a presentation in their final-year business strategy course…

A group of students are preparing for a presentation in their final-year business strategy course. The students have done all their analyses and are now finalizing their report. One of the students wisely suggests that a balance sheet and income statement should be included as part of their visual presentation and written report. As time is running out, one of the students prepares an income statement based on the competitive and market research completed and another student independently makes a comparative balance sheet based on what the financial plan suggests. The group feels proud they were able to complete this task so quickly and get their project in on time. However, during the presentation the instructor detects that the financial statements do not articulate and are unrealistic. Once this major error is uncovered the presentation quickly falls apart (and you can imagine how this story ends). Required: Identify three tests that the instructor might have done to determine whether the balance sheet and income statement fit together (articulate) or were developed independent of each other. Also suggest three tests of reasonableness the instructor might do to see whether the analysis is realistic.

 

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