Pro Forma Financial Statements. Pro Forma Financial Statements. Projected or “future” financial statements. The idea is to write down a sequence of financial statements that represent expectations of what the results of actions and policies will be on the future financial status of the firm.
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Sales (or Revenue)
Less Cost of Goods Sold
Equals Gross Income (or Gross Earnings)
Less Operating Expenses
Equals Operating Income
Less Interest Expense
Equals Net Income (Net Earnings, EAT, Profits)
Net Income – Dividends = Change in Retained Earnings
An income statement amount less dividends equals a balance sheet amount.
Interest Expense = Interest Rate Interest Bearing Debt
An income statement amount equals a balance sheet amount times a cost figure.
[Rev – Operating Exp – Depr&Amort
- (Int Bearing Debt)(Int Rate)](1- Tax Rate)
- Dividends = Change in retained earnings
Total Assets = Accts Pay + Wages Pay + Taxes Pay
+ Int Bearing Debt + Common Stock + Change in retained earnings