What is a pro forma financial statement?
A pro forma financial statement is a projection of a company’s future financial performance based on assumptions and estimated data.
Why are pro forma statements important?
They help businesses plan for the future, evaluate potential investments, and assess the financial impact of strategic decisions.
What do pro forma statements include?
They include projected revenue, expenses, cash flow, and profitability. Assumptions about growth, costs, and market conditions underpin these projections.
How are pro forma statements created?
They are created using historical data combined with assumptions about future performance. Businesses adjust variables such as sales growth or cost changes.
Who uses pro forma financial statements?
Management, investors, and lenders use them to assess future potential and make informed decisions.