What is the correct order in constructing a manual projection?

The correct order in constructing a manual projection begins with constructing the income statement before calculating balance sheet elements because the income statement provides crucial financial performance information for the company, such as revenue, expenses, and net income. This information is foundational as it serves as the starting point for calculating other financial metrics and influences elements on the balance sheet, such as retained earnings.

Once the income statement is established, it informs the related liabilities and assets on the balance sheet, including the retained earnings which stem directly from the net income. In this way, the income statement essentially drives the calculations needed for the balance sheet.

The other options, while important elements of financial projections, do not follow this logical sequence. For example, determining debt impacts or forecasting capital expenditures should follow after the fundamentals of income generation have been established. By laying out the income statement first, the estimator can accurately project the company's financial position and performance in subsequent steps.