Pro Forma Statement Analysis

There are different types of budgeting that businesses typically use and those include Operating budgets, Capital Budgets and there are many subtypes that exist because a budget can also be created for special events, the recruitment and retention of new staff, and to manage the advertising expenses and return on investments for a business (Demand Media, 1999-2012). According to Demand Media (1999-2012), "An operating budget outlines the total operating expenses and income for the organization, typically for the period of a fiscal year. Capital budgets evaluate the investments and assets of the business, and a cash budget shows the predicted cash flow in and out of the business over a period of time” (para.2 ). According to the Cost-Benefit Analysis (2012), “Capital budgeting has at its core the tool of cost-benefit analysis; it merely extends the basic form into a multi-period analysis, with consideration of the time value of money. In this context, a new product, venture, or investment is evaluated on a start-to-finish basis, with care taken to capture all the impacts on the company, both cost and benefits. When these inputs and outputs are quantified by year, they can then be discounted to present value to determine the net present value of the opportunity at the time of the decision” ("Cost-Benefit Analysis," 2012).

A budget is essential for a company to succeed. Without these budgets, it is very hard to be able to see where all

As a result, to promote the financial health of any organization one should know the present value of the investment and have a good ideal of how long that investment will take to mature and give back returns. In order to create a capital budget I have to consider the needs of the organization, look at the finances, goals, and position that the business is. In doing I could make a decision about the needs of that business. Second, I would have to collect, compare, analyze, and evaluate the cash and financial statements in order to compare the cost and revenue. It would give me some lead way into the position of the business when it moves forward to the future. Third, the capital budget would have to be compared to the cash flow, because it will help me to know how important it is to make the investment only if it increases the financial bottom line and increase the total financial performance of the business. I can use the

Capital Budgeting encourages managers to accurately manage and control their capital expenditure. By providing powerful reporting and analysis, managers can take control of their budgets.

Capital Budgeting encourages managers to accurately manage and control their capital expenditure. By providing powerful reporting and analysis, managers can take control of their budgets.

Cash Budget is the evaluation of cash influx and efflux of a business for a particular period of time.

Second, since we have to complete a pro-forma financial and income statement for our essays, it is great that two of the three questions address the two types of statements. I agree with you that careful consideration for both the pro-forma and income statement needs to be focused on, especially if corporations are projecting a new project.

The pro forma statements provide an essential standard for operating a company throughout the year. These statements can determine whether expenses are expected to run higher in the first quarter than in the second. They can also decide whether sales can be expected to run above average in certain months. Furthermore, they can determine when a business should increase their marketing campaigns to boost sales in slower months. These statements provide a business with invaluable information to make important business decisions (Business Town, n.d.).

What do pro forma financial statements show? Pro forma financial statements are basically the projected results for the financial statements in future, using the given assumptions of what is likely to happen in the current time. A pro forma financial statement shows the consequences of financial choices in the context of financial statements •

In conclusion, every major company in the world uses budgeting and there is a good reason for that. It is an important component of financial success. Budgeting makes easier to achieve financial goals. It keeps track of all expenses and help to avoid crisis. It also helps companies to control their growth and provide them with realistic idea where business is going.

For someone with inconsistent monthly income, this is a great type of budget since it compares your income to expenses during those short times. Sometimes you may have a budget deficit, and some months a surplus, a cash flow budget would show you that, whereas, the comprehensive

The financial tool such as a pro-forma statement can give a better view of a real financial situation of an individual. The financial statements are used to prepare budgets in order to make better financial decisions and planning to achieve short and long term goals. There are different processes in order to prepare a budget, and these processes are: defining goals and gathering data; forming expectations and reconciling goals and data; creating the budget; monitoring actual outcomes and analyzing variances; and, adjusting budget, expectations, or goals.

However it is not only companies who benefit from constructing a cash budget. “For individuals, a cash budget is a good method of determining where your cash is regularly being spent. This is

Budgeting allows investors and banks to know that company is responsible with the money that goes in and out to determine their future. Also, budgeting allows a company to expand or create more businesses. My boss started his business as a mom and pop shop as a cleaning company Last year, he opened the restoration company, and this year he opens the cleaning supplies store and in the next month a window cleaning company. All his business relates to one another, but the overall success of his companies has known how to budget his expenses and profits. By budgeting, it has allowed him to continue investing in other ventures and secure his kids

The cash budget is another aspect of budget expectation. The cash budget determines how much cash an organization have on hand, and how much is needed to meet each expense. The cash budget will reveal to companies the availability of any type of surplus the company has for short-term investments.