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Analyzing Pro Forma Statements

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Analyzing Pro Forma Statements

FIN/571
Kalena Armstrong-Henry
November 4, 2013

Analyzing Pro Forma Statements
General and financial managers can both benefit from forecasting financial statements. Proforma statements assist financial managers to plan accordingly, in terms of the company’s financial needs. How much financing is needed and when it is needed can be determined by acquiring an estimate of the company’s future balance sheet accounts and income statement. Hence, the purpose of the Proforma analysis is to forecast the company’s financial statements under a particular condition (Parrino et al., 2012).
Subsequently, total assets must equate the sum of total liabilities and owner’s equity; otherwise the manager must consider corrective action (Parrino et al., 2012). The Proforma analysis has been proven to be instrumental for general managers in the planning of inventory and employment intensities; particularly problems solving issues.
During the developing stages of the forecasting a manager is permitted to analyze the results; thus, identifying potential “hot spots” and handling the issues accordingly. Dealing with “hot spots” with ample time to spare during the forecasting stage is vital to any financial manager. When performing a Proforma Analysis the financial manager can handle forthcoming issues weeks or months in advance; thus, providing the manager ample time to avoid a potential real-time calamity. Subsequently, the manager will gain the ability to anticipate opportunities. This prospect allows the manager to accomplishment set goals and make the most of the analysis, long before the opportunity expires (Parrino et al., 2012).
Consequently, Proforma can be used for more than a forecasting tool. It is also used for planning, evaluate variances, making interim adjustments, creating mid-stream corrections, error detection, comparison

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