Analyzing Pro Forma Statements

Analyzing Pro Forma Statements

Keyawana Masterson

FIN / 571

September 28, 2015

James Traylor, Professor

Analyzing Pro Forma Statements

Companies use Pro Forma statements to outline the financial forecast of the company. This forecast would show and entail 1) projection of annual money needed for special projects 2) amount of money remaining to invest and 3) the determination of the future profit and losses. In forecasting beginning stages, managers determines whichever opportunities may come up during the upcoming months / years resulting from particular development patterns.

Pro forma statements similarly be used for finding errors, planning, alternations to mid projects, correcting interim adjustments and contrasting reports from prior years to future projections. We will perform a pro forma analysis using XYZ Company financial statements to determine the company’s financial health over a five-year period. In the event sales will intensify over a five-year span because of new, innovative products or enhanced marketing techniques, as a result a profit and increase in revenue should prevail.

Though projecting Pro forma statements are generated to forecast balances based on a particular date, then gathered and combined within a financial statement. Obtaining the factors that effect them, you can understand the forecasted account balances and how each account is impacted. The example below will illustrate XYZ’s company five-year pro forma projection using both the balance sheet and profit & loss statements.

Income Statement | | | | | | | |

| 2011 | % Ratio | 20X1 | 20X2 | 20X3 | 20X4 | 20X5 |

Sales | 1,747,698 | 100.0 | 2,097,238 | 2,306,961 | 2,537,657 | 2,791,423 | 3,070,566 |

Gross Profit | 697,428 | 39.9 | 836,914 | 920,605 | 1,012,665 | 1,113,932 | 1,225,325 |

Operating Profit | 286,578 | 16.4 | 343,894 | 378,283 | 416,111 | 457,722 | 503,495 |

Total Pre-Tax Profit | 262,428 | 15.0 | 314,914 | 346,405 | 381,045 | 419,150 |...