How to Prepare Pro Forma Financial Statements

Download or read book How to Prepare Pro Forma Financial Statements written by Michael Worthington and published by Createspace Independent Publishing Platform. This book was released on 2017-01-02 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Pro forma financial statements are essential elements of a business plan. This accounting worksheet approach provides a practical, step-by-step method to prepare the statements. Using an e-spreadsheet application automates the process, making it simpler, faster, and more accurate. First prepare all of the other sections of the business plan: Executive Summary, Business Description, Products or Services, Market Study, Organizational Structure, Financial Plan, and Personnel Resum�s. Then the pro forma financial statements translate the other components of the business plan into quantitative tables. There are three pro forma financial statements: (1) Income Statement & Changes in Owner's Equity, (2) Balance Sheet, and (3) Cash Flow. The statements are prepared month by month for the first fiscal year, and then by quarters for subsequent years. The pro forma statements allow the entrepreneur to tinker with the assumptions in the business plan: sales price, expenses, investments, etc. Once the statements are set up in an e-spreadsheet, changes in any assumption cascade through the whole worksheet. The statements are also crucial elements of business plans presented to potential investors or lenders. An e-spreadsheet approach makes it possible to create attractive, informative pro forma financial statements.