What is a pro forma financial statement?

A pro forma financial statement is indeed a projection of future financial performance based on certain assumptions. This type of statement is primarily used by businesses to forecast their potential financial outcomes and support decision-making processes, such as planning for investments, budgeting, and evaluating the financial impact of strategic business decisions.

Pro forma statements help stakeholders visualize the financial effects of different scenarios or plans, allowing for a proactive approach to financial management. By incorporating anticipated revenues, expenses, and other financial factors, a pro forma statement assists businesses in assessing risks and opportunities in their financial future.