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Analyzing Pro Forma Statement

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Analyzing Pro Forma Statements
Kaleah S. Daniels
FIN/571

Analyzing Pro Forma Statements
Pro forma statements are prepared to forecast financial results that are based on anticipated future projects or events. It is design to show projection of revenues, cash flows deducting the estimated expenses or costs for a particular business plan. Pro forma 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 Pro forma analysis is to forecast the company’s financial statements under a particular condition (Parrino et al., 2012).
XYZ Company, INC. is planning for business expansion in the coming years. This paper will discuss and analyze pro forma statements of five year projections created. The company’s income statement displays that the break in the current year occurred when;
“Net sales equals $1,747,698, Gross profit equals $697,428 and Total operating expenses equals $285,850” (UOP, 2014).
XYZ’s “management expects sales to increase by 10 percent for the coming year. Assuming that the financial statement accounts vary directly with changes in sales and that management has no financing plan at this time” (Parrino, 2012, pg. 613). Using the data from the current statement (income & balance sheet) we are able to calculate, 1) Projected sales = $ 1,747,698 * 1.10 = $ 1,922,467.8…………. (Year -2015) 2) Projected costs = $ 1,050,270 * 1.10 = $ 1,155,297
Thus, XYZ’s projected net income is projected costs subtracted from projected sales i.e. 1,922,467.80 - 1,155,297 = $ 767,170.80Similarly, projected (assets, debt, equity) are calculated for the coming five years. (Please refer excel worksheet attached) Year | Net Sales |...

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