Preparing a pro forma balance sheet along with providing the assumptions and supporting the valuations has to be a really basic assignment for your business. The crucial part is that your pro forma income statement report is required to present the financial results based on certain forecasted features which your firm is most likely going to face in the near future. The pro forma report is simply a proof that your venture is generating revenue. This is very crucial for any enterprise because it is going to rank the approximate figures of your organization including income, loss, and expenditure. Additionally, as investors decide how much money they are going to spend, certain rules must be followed while making a pro forma income statement. …show more content…
Some companies leave out one-time investments which give the look of putting less money and getting more gains. But this is equivalent to duping the investors and the same person that allocates capital will no longer be interested in your further initiatives. On the other hand, pro forma statement for each plan can forecast the income on each plan and can predict capitalization. These statements can also be used to choose among different plans proposed. Based on these statements company introduces budget. Further, the outcomes in a proforma income statement can be normal, above normal and below normal. These outcomes can be evaluated after the results and pro forma statements can be used to compare them with the results. This would estimate the accuracy of pro forma statement. Pro forma statements are also helpful for stockholders of the company to assess the progress of the company and then decide to invest more or less depending on their agenda. SEC format Securities and Exchange Commission (SEC) requires a regular format for companies in creating and performing pro forma statements. The following format should be used and there are several tools available which can help you ease your work: 1.