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How do you conduct a ratio analysis on a pro forma? Can you show an example?

How do you conduct a ratio analysis on a pro forma? Can you show an example?

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Answer #1

Pro Farma is just a projected financial statement which are used in budgeting the difference is that it is not based on actual past transactions as in typical financial statements. Egs are projected Balance sheet, projected income statement , projected cash flow etc.

The formula for ratio and the method to calculate ratio remains the same just that the amount we will be consering will be projected as mentioned in Pro Farma.

To calculate Current ratio we will take Current asset/current liability

Projected balance sheet (Pro Farma)

Current assets - $100

Non-current assets - $1000

Current liabilty - $200

Non- current liabilty - $500

Capital - $400

Current ratio = $100/$200 = 0.5

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