Month End Glossary

Pro Forma Financial Statements

Pro forma financial statements are hypothetical or projected versions of financial statements that are prepared by companies to showcase potential scenarios or planned financial positions.

Pro forma financial statements are a type of financial document that aims to present a stipulative financial outcome for a company. These statements are not based on actual historical data but rather are developed using assumptions and projections about future conditions. They are frequently used for business planning, forecasting, or during events such as mergers and acquisitions. For example, a company might create a pro forma income statement to estimate financial performance if they were to acquire another company. Business owners and analysts often use pro forma financial statements to evaluate the potential financial impact of strategic decisions. A sentence example: 'The team prepared pro forma financial statements to analyze the expected outcome of the company's expansion into a new market.'

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