Pro Forma Income Statement

A pro forma income statement is a projected income statement.

Pro forma income statement. What is an income statement. Pro forma a latin term literally means for the sake of form or as a matter of form in the world of investing pro forma refers to a method by which financial results are calculated. It plays a vital role in the planning process which can help to minimize the risk associated to undertaking a new project. Pro forma in this context means projected.

So when you create next year s budget you can include that extra 7 000 maybe spending 4 000 over the course of the year to pay down the principal on a loan while adding 3 000 to savings. Work the arithmetic through to the bottom to complete a pro forma income statement. Pro forma is a fancy word for future or projected. For my purposes here a pro forma income statement is similar to a historical income statement except it projects the future rather than tracks the past.

In this example you would multiply all of last year s income statement line items by 1 10 to show a 10 increase. It details the amount of money made and spent within a certain period. Pro forma income statement is the statement prepared by the business entity to prepare the projections of income and expenses which they expect to have in the future by following certain assumptions such as competition level in the market size of the market growth rate etc. A pro forma income statement is just an income statement under certain assumptions with projections.

A company s income statement is one of its most important financial documents. Pro forma income statement template microsoft excel. The income and expenditure of the future period of the enterprise can be estimated by this table. According to your pro forma annual income statement it will be 44 000 next year.

A pro forma statement is a statement that presents the income of the entity in the estimated period and the expenditures to be made in a categorical manner and summarizes the result of such period activities as profit or loss. A pro forma statement is an important tool for planning future operations. Create a pro forma income statement by using the calculated percentage change in sales.