Pro Forma Statement Analysis

each element in your Question 1 pro forma profit and loss statement. Are there any items that

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

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

With respect to Columbia Memorial Hospital, a profit and loss statement must be done in order for the clinic to know if they should continue expanding or shut down. A pro forma profit and loss statement advances the company's proposal for future revenues and expenses. Various companies have numerous approaches they use to reach how they will deliver the goods financially for the future. Separate scenarios have been investigated.

When you’re looking at the income statement, you can get information about profitability for a particular period. This is also called the profit and loss statement. The income statement is composed of both income and expenses. This statement can be used to deduct expenses from income and report either a net profit or net loss for that period. This statement will deduct all expenses from income and then report your net profit or net loss for that period. This will allow the business owner to determine if the business is bringing in a good amount of revenue to make a profit. The cash flow statement shows the movement in cash and balance over period. The cash flow can vary depending on the operating activities, investing and financing activities. This statement provides one business owner with insight to the company’s liquidity which is vital to the growth of the business. Reinvesting in business is very important, looking at the statement of retained earnings will tell a business owner how much were reinvested in the company. After profitable period, every big business has to give some of its profits to stockholders, and keep the rest amount as retained earnings. Out of all statements, retaining statement is important to companies that sells stocks to the public. This statement can also provide you with assets and liabilities information. These informations can be used to assess the financial health of your business. The results of a balance sheet will help the business owners to show the risk of liquidity and credit. Looking at these information you can measure trends and relationships to show where in the areas you can improve. These can also be compared to similar companies to show how the business measures up to leading competitors (Ali, 2010). In summary, the financial statements can provide a business owner

Pro forma financial statements are made to reflect a purported change, such as a merger, something acquired, or to give emphasis to specific figures when a corporation issues an earning announcement publicly. Investors need to be cautious when reading

3. Prepare a pro forma balance sheet and income statement providing the assumptions made and support the valuations assigned.

First of all, because this helps to prevent fraudulent practices. It makes easier for management, shareholders and potential investors to digest the information. It also allows comparing these statements against business competitors or the company’s own past statements to measure

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;

The assumptions formed in preparation for executing the pro forma balance sheets and income statements are important because they are being used to determine whether or not your endeavors are worthwhile. Identifying important trends within the assumptions will help to give you a better idea of the market value of your

6. A pro forma income statement analysis that includes a forecast of revenue for the coming year, major cost and expense categories, earnings, earnings per share, and dividends. Rely on your own forecast. Do not base your analysis on a sales or earnings forecast from a secondary source such as Value Line.

The word pro forma is a Latin term meaning “as a matter of form”. Looking at its meaning in business, financial statements are a main focus. Business pro formas are prepared in advance of a planned transaction. The pro forma statement illustrates projected earnings if a company were to sell off parts of its operation, merge with another company, or beginning a new venture. When a performance statement is used a company is able to

For our pro forma, we first began with the income statement. To determine Sales, we assumed an increase at a consistent rate each year. COGS and operating expenses were estimated as a percentage of Sales. Exceptional Costs and Restructuring Costs were not considered since pro forma statements exclude unusual and nonrecurring transactions. With these figures, we were able to determine our Profit Before Tax (PBT). For our tax expense, we assumed a constant tax rate. By subtracting the Tax Expense from our PBT we determined the Profit/(loss) After Tax. Lastly, we subtracted dividends, which remained unchanged each year, from the Profit/(loss) After Tax to find the company’s Retained Earnings. Below is a diagram illustrating these steps:

It is important for every business to carry out financial statement analysis in order to gain an understanding of their current financial status. There are two main types of financial statements that businesses commonly use when it comes to financial analysis. These are known as the Profit and Loss Account and the Statement of Financial Position. A profit and loss account consists of a list of expenses incurred by the company, against their revenues over a certain period of time. It shows whether the organisation

Regarding to a business annual report, a business model is included as a reference when the report is making. Financial statements should have four certain qualitative characteristics so as to be useful to all users. These are understandable, relevant, reliable and comparable. As suggested by Anonymous (2013), financial information is relevant if it can be a comparable data when a business is making decisions. This is because it is important to have a forecastle and faithfully value in the financial information, and ensure the qualitative characteristic is understandability.