1240 Words5 Pages
Kyle Zerbe

When, where, why, and how the Business pro forma is used will be discussed in this paper. The purpose of a business pro forma and components (income statement, balance sheet, statement of cash-flows) will also be included. The roll and purpose of an executive summary will be discussed as well.
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
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which are added to pro forma total current assets which yield pro forma total assets. The next section deals with liability. It begins with pro forma accounts payable which is determined by figuring out how much a company will spend on bills and previous purchased supplies. Next is the pro forma accrued payroll, which is easy to determine after establishing salaries. The pro forma notes payable is notes payable within one year. Pro forma total current liabilities are calculated by adding pro forma accounts payable, accrued payroll, and notes payable. Proceeding this, pro forma long term liabilities are calculated which may include things such as pro forma mortgage note payable. Combining pro forma long term liabilities and pro forma current liabilities will provide pro forma total liabilities. The last section of the pro forma balance sheet is pro forma owner’s equity, which includes pro forma common stock and pro forma retained earnings. 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. An executive summary
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