Download Pro Forma Balance Sheet Template

proforma balance sheet

There are several situations where having a pro forma income statement or other report can come in handy. In fact, there are several pro forma financial statements, and you may want to use more than one to get a full financial picture of your business.

A pro forma income statement is a financial statement that uses the pro forma calculation method, mainly to draw potential investors’ focus to specific figures when a company issues anearnings announcement. Companies may also design pro forma statements to assess the potential earnings value of a proposed business change, such as an acquisition or a merger. A pro forma balance sheet, along with a pro forma income statement and a pro forma cash flow are the basic financial projections for a business. Assuming Bob wants to open a new shop in the future, but he anticipates that he will not have the capital to do so.

So as you’ll see once we discuss how to create pro formas in just a little bit, they don’t require you to recreate the financial reporting wheel, at least in terms of format. A pro forma balance sheet is a balance with forecasted future values. As we know, balance sheets contain a running balance of all existing assets, liabilities, and equity for a business.

proforma balance sheet

Owners create a set of projected financial statements, including the balance sheet, income statement, and cash flow statement, based on a set of assumptions. The pro forma income statement is prepared first, followed by the pro forma balance sheet and finally, the pro forma cash flow statement. The purpose of pro forma financial statements is to facilitate comparisons of historic data and projections of future performance. Pro forma adjustments to accounting principles and accounting estimates reformat the statements of the new entity and the acquired business to conform with those of the predecessor. Pro forma, a Latin term meaning “as a matter of form,” is applied to the process of presenting financial projections for a specific time period in a standardized format.

A well-crafted pro forma is just as invaluable for small businesses looking for more or first-time funding as it is for the investor. From it, an investor or owner should be able to perform what-if scenario analysis, calculate financial ratios, potential profit after taxes, and determine future financial health. Do your due diligence to increase the chances that your predictions will Online Accounting be accurate. However, don’t forget that, no matter what you do, you will still run into issues of accuracy and reliability when using pro forma financial statements. As an important shareholder of a Boston MA business or organization, you will be presented with a pro forma balance sheet several times. Knowing the fundamentals of how to understand its contents will come in handy.

Pro Forma Balance Sheetsmeans the unaudited pro forma consolidated balance sheet of VIE1 as of March 31, 2013, prepared in accordance with U.S. Once you’ve created your pro forma income statements, and cast your eyes forward to the future of your business, you can start planning how you’ll spend your money. It may be tempting to think of a pro forma statement as the same as a business budget. But budgets and pro forma statements are two distinct financial tools.

Cash Flow Sweep With Crash And Default Analysis

This portion of the pro forma statement will project your future net income, sale of assets, dividends, issuance of stocks, etc. This is the second section of your pro forma financial statement. Simply put, it’s a future or projected income statement, or it can even be used to restate financial books in an unofficial way. For example, a business may use a pro forma financial statement to show what a businesses profit was if it sold off an arm of the company. This projection looks backward at another company’s financial statements. For the same period, it also looks at the business they are acquiring.

New financial models use computer programs that has made this testing better, which enables quick calculation for real-time decision making. Pro forma analyses are meant to paint a better picture of what is happening with the company, irrespective of one-time events, but considering the specific industry’s standards. In some respects, this type of analysis is a more accurate depiction of the company’s financial health and outlook. Further, organizations may want to develop their pro forma financial statements while they are doing an annual review of their business plan. You will need to think of all the ways that your organization will generate income and what costs you will need to incur to generate that income.

She taught college-level accounting, math and business classes for five years. Her writing highlights include publishing articles about music, business, gardening and home organization. She holds a Bachelor of Science in accounting and finance from St. Joseph’s College in Rensselaer, Ind. Net income is affected by the interest expense, which also changes retained earnings, which also affects the amount of interest-bearing debt necessary. The cash balance is usually calculated using a model and policy decisions. Use this Excel pro forma invoice template to create your own pro forma invoices. Add the partner capital balance to the contributed capital instead of to retained earnings through pooling of interests.

proforma balance sheet

We won’t spend too much time discussing current liabilities because we’ll handle them similarly to current assets. Both “current” sections are highly related to business operations, which is what the income statement is all about. Prepare your pro forma income statement using data you’ve compiled in the prior four steps.

Pro Forma Balance Sheets Definition

In her role at Fast Capital 360, Erin covers topics of interest to small business owners, including sales, marketing, business management and financing. Managers can use them to play with various what-if scenarios. This might be the introduction of a new product, the acquisition of another company, the purchase of new equipment or the closing of a money-losing division. The objective is to examine various alternatives and determine the best course for the business. Prudent financial management requires a balance between the amount of debt a company owes compared to its equity base.

  • The SEC assumes that that proceeds from any additional shares will be used to fund dividends.
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  • Any expected receipts from other sources should also be added to the balances.
  • Title this statement “Pro Forma Balance Sheet.” Write in the company name and the date for which you are predicting the information.
  • Pro forma financial statements are projected financial statements that are produced using several presumptions or projections.

Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein. You could do this by growing your number of sales a fixed amount every month, or gradually increasing the amount of sales you make per month. …plan proforma balance sheet for the future, by considering best, worst, and most likely case scenarios in detail. …get financed, by showing lenders or investors how you would use their money to sustainably grow your business. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Investopedia does not include all offers available in the marketplace.

Pro Forma Earnings Per Share

Under US GAAP, the non-controlling interest must be measured at its full, acquisition date fair value and not simply the noncontrolling share of the fair value of the separable net assets. Ken Boyd is a co-founder of and owns St. Louis Test Preparation ( He provides blogs, videos, and speaking services on accounting and finance. Ken is the author of four Dummies books, including “Cost Accounting for Dummies.” Cash flow from operations includes cash inflows from customer payments, and cash outflow for material purchases and payroll costs. However, ongoing litigation might be a regularly occurring cost in some businesses, such as medical devices, and should be reported as a normal cost of doing business. Then estimate all of your costs and liabilities, such as loans, rent, payroll, taxes, etc.

proforma balance sheet

There are many different periods that could be covered, as well as the different purposes for the pro forma financial statements. Add back depreciation to capital expenditure, which is arrived at on the cash flow statement.

Forecasting Financial Statements

We can then multiply our percentage by future COGS to get the forecast for our balance sheet. Bench QuickBooks gives you a dedicated bookkeeper supported by a team of knowledgeable small business experts.

Short of having a crystal ball, pro forma financial statements can help you predict things like net income and gross profit in the future. Using these financial statements, you can plan for the future and lower your risk, as well as attract investors or get approved for financing. Once the pro forma balance sheet is prepared, the pro forma cash flow statement can be prepared.

When Should You Use Pro Forma Financial Statements?

They must also ensure they label all pro forma information as such, to avoid confusion with historical information, and list the specific bookkeeping assumptions and uncertainties about them they are making. In the annual averages, the figures should not vary significantly.

How To Read A Pro Forma Balance Sheet

The objective of pro forma documents is to help management present their information. Consider making pro forma provision for taxes that would have been paid if the company was a corporation in the past. Focused on future strategy, not just historic numbers, we help small to mid-sized businesses and startups reduce financial risk and grow. You get access to our consistent team of experts — priced by the hour, so you only pay for what you need. We’re collaborative, explaining what the numbers mean, rather than just emailing reports. If you are a business owner, inventor, entrepreneur, or investor who is researching this, the answer is now. The information gathered from a pro forma and supporting schedules are relevant to you and your future decisions.

We’re here to take the guesswork out of running your own business—for good. Your bookkeeping team imports bank statements, categorizes transactions, and prepares financial statements every month. On the other hand, if net cash flow is positive, you can plan on having enough extra cash on hand to pay off loans, or save for a big investment. Financial institutions use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures. 3.1) Analysis of risk typically aims at detecting the underlying credit risk of the firm. Liquidity analysis aims at analyzing whether the firm has enough liquidity to meet its obligations when they should be paid. A usual technique to analyze illiquidity risk is to focus on ratios such as the current ratio and interest coverage.

To forecast these earnings, we take the most recent value for retained earnings and add the net profit for the current month. This step wraps up the explanation of our first section, and the only thing left is to add it all together for our total current assets. Download thePro Forma Balance Sheet Templatethat has been created to provide a three year balance observation for the purpose of acquiring a business loan. In year 1, provide current year information and in the year two and three it would be the 2 years prior. Once completed there will be an overall observation of the financial aspect of the business over the last three years. It is a large portion of the decision making process in business loan acquisition.