PRO FORMA FINANCIAL

STATEMENTSGoals Prepare a pro forma cash flow

statement. Prepare a pro forma income

statement. Prepare a pro forma balance

sheet.

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TERMS cash flow statement income statement balance sheet

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CASH FLOW STATEMENT cash flow statement

an accounting report that describes the way cash flows into and out of your business over a period of time

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FORECAST RECEIPTS AND DISBURSEMENTS estimate

monthly cash receiptsmonthly cash disbursements

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PREPARE THE CASH FLOW STATEMENT net cash flow =

cash receipts ─ cash disbursements

Tracking monthly cash flow statements enables you to anticipate periods of positive

and negative cash flow

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ECONOMIC EFFECTS ON CASH FLOW Changes in the economy can

dramatically effect the cash flow of businesses.

Business owners should make conservative estimates.

WHY?

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What does a cash flow statement show?

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INCOME STATEMENT income statement

shows revenues and expenses incurred over a period of time

shows the profit or loss for the time period

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PREPARE A PRO FORMA INCOME STATEMENT The long-term growth of your business

can be demonstrated by a pro forma income statement prepared for multiple years.

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RevenueCost of goods soldGross profitOperating expensesNet income before taxesTaxesNet income/loss after taxes

The pro forma income statement consists of:

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What does an income statement show?

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BALANCE SHEET balance sheet

a financial statement that lists what a business owns what a business owes how much a business is worth at a point in time

assets =

liabilities + owner’s equity

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PREPARE A PRO FORMA BALANCE SHEET fixed assets

used for many years current assets

items that are used up in normal business operations

accounts receivable the amounts owed to a business by its

credit customers

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debts that are payable over a year or longer current liabilities

debts that must be paid in full in less than a year accounts payable

amounts owed to vendors for merchandise purchased on credit

long-term liabilities

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the amount a company estimates it will not receive from customers

depreciation the lowering of an asset’s value to reflect its

current worth

allowance for uncollectible accounts

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YOUR TASK Find an article on the internet that

discusses the current state of the industry. Summarize the article and discuss how the status of your industry will affect your business’s cash flowShould be a minimum of 2-3 paragraphs