Understanding Pro Forma Statements

A Pro Forma Statement is a financial statement that is used to project a company’s future financial performance. This statement is usually prepared for use by potential investors or lenders who need an idea of how the company is likely to perform in the near future. It is also used to evaluate the performance of a company in the past.

What is a Pro Forma Statement?

A Pro Forma Statement is typically used to project the financial performance of a company. It is a financial statement that is prepared for use by potential investors or lenders. It is important to note that a Pro Forma Statement is not an actual financial statement, but rather a projection of what the financial performance of the company may look like in the future.

Examples of Pro Forma Statements

A Pro Forma Statement may include a variety of different financial figures. These may include a balance sheet, income statement, cash flow statement, and statement of retained earnings. Each of these statements will provide information on the company’s assets, liabilities, equity, revenue, expenses, and other financial elements.

Example 1: Balance Sheet

A balance sheet is a financial statement that lists a company’s assets, liabilities, and equity. This statement is used to evaluate the financial position of the company. The balance sheet will list the company’s assets, such as cash, inventory, accounts receivable, and property, as well as liabilities, such as accounts payable, loans, and taxes. Finally, the balance sheet will list the company’s equity, which is the difference between the assets and liabilities.

Example 2: Cash Flow Statement

A cash flow statement is a financial statement that shows the sources and uses of cash within a company. This statement is used to evaluate the company’s financial performance. The cash flow statement will list the company’s cash inflows and outflows, such as cash from operations, investing, and financing. This statement will also provide information on the company’s income, expenses, and changes in cash.

Benefits of Pro Forma Statements

The main benefit of a Pro Forma Statement is that it provides potential investors or lenders with an idea of how the company is likely to perform in the near future. This can help them make an informed decision on whether or not to invest in the company. In addition, a Pro Forma Statement can be used to evaluate the performance of a company in the past.