Question

I was given a case and I have to calculate the pro forma. I need to find the assumptions, my question is how do I calculate the assumptions?

Answer 1

In case of a pro forma you will have to calculate financial results using certain presumptions and certain projections.

For instance you can assume that sale will grow by 10% and last year’s sales was $1000. Thus sale amount next year will be $1000*1.1 = $1100

Now you assume that that cost of goods sold will be 50% of sales as in the past, operating and other expenses was 30% of sales in past but will grow to 35% now. Hence your pro forma income statement will look like this:

	Pro forma
Sales	1100
less: COGS (50% of sales)	550
Gross profit	550
less: other expenses (35% of sales)	385
Net income	165