Pro-Forma Financial Statement

1. What is the purpose of financial statement analysis? The purpose of financial statement analysis is to provide information used by the business, potential creditors and investors.

The main purpose of the financial statements is to provide creditors and investors with a summary of a business financial activity. All statements are prepared at certain times throughout the year. The balance sheet reports liabilities, assets, and owner equity of the company. The income statement matches incurred expenses during a period of generated revenue. The statement of retained earnings reports retained earnings from net loss and net incomes from

Pro forma is similar in many ways to a historical income statement; however, it projects the future rather than tracking the past. I used the pro forma statements a lot in determining growth decisions to see what the financial effects would be in the future. In Quarter 4 they were very useful because I wanted to increase my sales force from 14 sales people to 24 sales people.

Financial statements are commonly called balance sheets, income statement, statement of owner’s equity, or statement of cash flows.

These are forecasts of what a firm expects its income statement and balance sheet to look like a year or two ahead. Occassionally, firms use this statements for several reasons:

The information found in financial statements outlines the financial activities of that company, and can help managers, creditors, and investors make many important decisions.

This will be a basic forecast created from pro-forma financial statements, using basic forecasting procedures.

Pro-Forma Financial Statements (I/S, B/S and Statement of Cash Flows) with deltas out three years and analysis

Pro-forma income statement to illustrate interest and dividend payment ability is based on various assumptions as shown in Exhibit 1. Expected cases are the measures used in the following discussion. Conservatism is adopted throughout the assumptions especially sales growth rate, credit rating and Medicaid penalty assumptions.

Financial statements of the company are significant for the investors who would like to venture into the business operation. It gives them the insight whether the business is making profits or it is doomed to fail;

Financial statement measures the financial performance, liquidity and strength of the firm, it is important

The pro forma statements of cash-flows are projected statements of cash flows. Cash receipts are classified as operating, investing, or financing activities. In direct presentation it reports the major classes of gross cash, operating receipts, and payments and the difference between them. Indirect presentation reconciles net income with the net operating cash-flows which requires balance sheet data such as accounts receivable, accounts payable, inventory, and net income.

We have constructed pro forma financial statements based on the sales-driven estimates and interest and tax fixed burdens. The key determining factors to the accuracy of these projections are the assumptions made about revenue growth and the sales-driven accounts like cost of goods sold, current assets (viz., inventory). Also, assumptions about the company’s capital budgeting

Financial Statements basically show the historical performance or record of the company at some previous point of time. By the time when financial statements are made public, changes are many economical areas such as market conditions, currency exchange rate and inflations can change the values of assets and liabilities. In this case there often exist discrepancies between book value of assets and their market values.

For a business enterprise, all the relevant financial information, presented in a structured manner and in a form easy to understand, are called the financial statements. They typically include four basic financial statements, accompanied by a management discussion and analysis: