Please respond to the following:
- Explain the difference between financial statements and pro forma financial statements. Describe how these statements are developed and used in financial management and planning.
note from professor: According to Advani (2012) financial statements consist of the normal balance sheet, income statement and cash flow statement. To be more detailed financial statements are any of the forms that can be publicly filed such as the 10-K, Annual Report, Proxy Statements, 10-Q, Form 8-K and Form 144. Pro Forma statements in general are just adjusted financial statements that fall into two categories:
- Adjusted Earnings
- Projections
In essence Pro forma Statements are mostly used for forecasting and planning. I will leave you with this small bit of information so that you can expand on the second part of the question.
References:
Advani, R., & Greene, D. (2012). The Wall Street MBA. McGraw-Hill.
