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1. What are examples of pro forma financial statements? How are they used? 2. Discuss the...

1. What are examples of pro forma financial statements? How are they used?

2. Discuss the differences between GAAP financial statements and pro forma statements?

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Answer #1

Answer 1

Examples of proforma financial statements:

  • Projections.
  • Funding.
  • Merger & Acquisition Analysis.
  • Risk Analysis.

Usefulness of proforma financial statements:

  • Showcase company's performance to potential investors in case the company is seeking fund.
  • Understand the impact of acquisition on the financials of the company.
  • Helps the investors to understand the management stratergy.
  • It helps in the due diligence process.

Answer 2

  • Depreciation, amortization, restructuring costs or merger costs, one-time costs, employee stock options, and stock payouts, etc. are not considered in proforma financial statements whereas under GAAP they are considered.
  • GAAP financial statements shows how much money company made whereas proforma financial statements show money made from usual or ordinary business activities.
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