Post on 28-Dec-2015
PRO FORMA FINANCIAL
STATEMENTSGoals Prepare a pro forma cash flow
statement. Prepare a pro forma income
statement. Prepare a pro forma balance
sheet.
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TERMS cash flow statement income statement balance sheet
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CASH FLOW STATEMENT cash flow statement
an accounting report that describes the way cash flows into and out of your business over a period of time
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FORECAST RECEIPTS AND DISBURSEMENTS estimate
monthly cash receiptsmonthly cash disbursements
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PREPARE THE CASH FLOW STATEMENT net cash flow =
cash receipts ─ cash disbursements
Tracking monthly cash flow statements enables you to anticipate periods of positive
and negative cash flow
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ECONOMIC EFFECTS ON CASH FLOW Changes in the economy can
dramatically effect the cash flow of businesses.
Business owners should make conservative estimates.
WHY?
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What does a cash flow statement show?
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INCOME STATEMENT income statement
shows revenues and expenses incurred over a period of time
shows the profit or loss for the time period
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PREPARE A PRO FORMA INCOME STATEMENT The long-term growth of your business
can be demonstrated by a pro forma income statement prepared for multiple years.
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RevenueCost of goods soldGross profitOperating expensesNet income before taxesTaxesNet income/loss after taxes
The pro forma income statement consists of:
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What does an income statement show?
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BALANCE SHEET balance sheet
a financial statement that lists what a business owns what a business owes how much a business is worth at a point in time
assets =
liabilities + owner’s equity
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PREPARE A PRO FORMA BALANCE SHEET fixed assets
used for many years current assets
items that are used up in normal business operations
accounts receivable the amounts owed to a business by its
credit customers
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debts that are payable over a year or longer current liabilities
debts that must be paid in full in less than a year accounts payable
amounts owed to vendors for merchandise purchased on credit
long-term liabilities
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the amount a company estimates it will not receive from customers
depreciation the lowering of an asset’s value to reflect its
current worth
allowance for uncollectible accounts
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YOUR TASK Find an article on the internet that
discusses the current state of the industry. Summarize the article and discuss how the status of your industry will affect your business’s cash flowShould be a minimum of 2-3 paragraphs