How Do You Make A Pro Forma Income Statement?
When you think of a pro forma income statement, think of it as a “what if?” What if the company’s sales grow by 10%? What if business expenses can be reduced 5%? Pro forma income statements are projections of what a company’s income statement will look like under different circumstances. They are used to help make decisions and also to give investors an idea of the financial status of a company under different conditions. There can be as many pro forma income statements for a company as assumptions on how business will change. Evaluate the business’ previous year’s income statement. This can either be done line by line or by subheadings. For instance, line by line would look at sales figures for each product line whereas the subheading would be “Total Sales.” Make a simple pro forma income statement by evaluating this year’s sales to date as compared to last year’s total sales. Calculate the percentage change of this year’s sales compared to last year’s sales. Take current “Total Sales
