Week 7 | FIN 534 – Financial Management | Strayer University

 

  • Explain the difference between financial statements and pro forma financial statements. Describe how these statements are developed and used in financial management and planning.

Respond:

 

pro forma financial statement projects performance over a period that has not yet happened. By using fictitious data or assumptions about future values. Unlike a financial statement, which is based on previous actual transactions, financial statements are documents that describe a company’s operations and financial performance.

Describe how these statements are developed and used in financial management and planning.

Investors, market analysts, and creditors assess a company’s financial stability and profit potential using its financial statements.

A company’s financial performance for a future time can be predicted using pro forma financial statements. Pro forma predictions are used by businesses to help them prepare for the best-case and worst-case scenarios.

The knowledge a corporation may learn from pro forma income statements is crucial. The financial accounts can assist in estimating if generating new items would result in higher expenditures, for instance, if it is getting ready to create new products.

Financial statements include income statements, balance sheets, and statements of cash flows. Traders can use these three statements as educational tools to assess a company’s financial health and to determine its underlying worth quickly.