Ch3 Pro Forma Statements

Question 1

prospective financial statements:
- Budgets, forecasts and pro forma statements

Answer 1

1. budgets: take into account assumptions required to achieve targets based on committed capital investments
2. forecasts: to provide information on the direction and results to be achieved and updated with current information (revised budgets)
3. pro forma: uses budgets as a starting point and then factor in a specific change or event to show the impact on prospective statements.

Question 2

Uses of pro forma statements

Answer 2

1. assessing the impact of changes
2. business planning
3. fianancial modeling
4. external reporting
5. determining external financing required