What Is A Pro Forma Income Statement?
The pro forma income statement is a financial statement which is based on certain projections and assumptions. So these statements are more like hypothetical amounts that give the organization data profit in an unofficial way. As an example, the company presents the pro forma report which predicting its income when they don’t include the money-losing. You can learn this type of documents from sample pro forma income statement which you can download for free on this page.
Breaking Down Sample Pro Forma Income Statement
The pro forma financial statement is also similar to the historical statement but it projects the future income rather than tracking the past. This report is very helpful to make a decision. For example, if the report projects downturn, then you can make some strategies such as changing the operational cost before this projection turns to reality.
Usually, this report is set to be yearly so it provides the operating business budget throughout the year. In this case, you can expect a budget can be raised or nor for the next planning. Also, this report can also predict expectation whether the sales will be above the average or not.
How To Make Pro Forma Income Statement?
A business plan at least should include three important pro forma report which is based on three main accounting statements, which are:
- The profit or loss statement – This is also best known as the statement shows sales, income, cost of sales, interest, taxes, and interest. This statement will be recorded monthly, quarterly or yearly.
- The balance sheet – This document shows the capital, liabilities, assets which can show the current position of the company.
- The cash flow statement – This report shows how much money is currently in the bank.
In the business, projecting or estimating the balance sheet is important because sometimes investors want to use it for analyzing debt ratios, overall leverage and also the liquidity level. However, such pro forma project statement is not showed officially, so the public cannot see it. Instead, the management will use it for analyses about what happened to the outflows and inflows in the future.
I want to get funding and attract investor, you need to use this document to make a well-organized strategy. This will gives more opportunity because you will be able to demonstrate how your business plan will create the return. It is a critical plan because this is one of the factors to convince the investor.
Typically, the accounting unit will provide the income statement and balance sheet so you can analyze it intimately and discuss the potential with the investors.
There are some steps you have to do in making this pro forma reports which are:
- Calculating the revenue projection
- Estimating the total liabilities
- Estimating cash flow
Besides, you can use the sample pro forma income statement to learn more about how to make a proper pro forma report. It is completed with the editable format too.
Make Financial Projection with Sample Pro Forma Income Statement
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