How Do You Calculate A Pro Forma?
Creating a pro forma statement of assets and liabilities is straightforward once all the necessary data is collected. Pro forma cash flow and balance sheets are created for purposes of modeling the financial ramifications of starting a new enterprise and testing assumptions about the viability of a new product. Pro forma calculations have considerable latitude in their interpretation. Create a pro forma cash flow. Make assumptions about how many units of a product can be created and sold. This is gross profit. Detail the cost of creating the number of units, including labor and materials. Detail the incremental costs of management, inventory and overhead. Note potential taxes. Ignore depreciation and amortization because they are non-cash items. Review the assumptions in step one and estimate again all the costs and expenses using best-case and worst-case scenarios, and using your original assumptions as a most likely case. Carry the net profit result (gross profit minus costs and expe
