Business Technology Mr. Bernstein Greene, pp : Pro Forma Financial Statements December 4, 2013

Business Technology Mr. Bernstein How Much Money Do You Expect Your Business To Make? Pro Forma = “for the sake of form” or “as a matter of formality” Three important Pro Forma Statements: Pro Forma Cash Flow Statement Pro Forma Income Statement Pro Forma Balance Sheet 2

Business Technology Mr. Bernstein Cash Flow Statement Describes cash flows into and out of the business, known as receipts and disbursements Cash flows are NOT the same as profits or even revenues and expenses – there are many non-cash revenues and expenses: Purchases on credit (accounts payable), depreciation Sales on credit (accounts receivable) 3

Business Technology Mr. Bernstein 4 Pro Forma Cash Flow Statement Walters Electric January-June 2014 JanFebMarAprMayJun Cash Receipts$4,200$5,410$5,750$6,320$7,375$8,130 Cash Disbursements: Cost of Goods$2,400$2,520 $2,640$3,300$3,480 Rent$900 Utilities$100 Salaries$2,000 Advertising$700 Supplies$100$115$130$150 Insurance$75 Payroll Taxes$175 Other$50 Total Disbursements$6,500$6,635$6,650$6,790$7,450$7,630 Cash Flow-$2,300-$1,225-$900-$470-$75$500

Business Technology Mr. Bernstein Income Statement Shows revenues and expense over time Produces the Profit or Loss for the time period Includes revenues you have not yet received and expenses you have not yet paid Key Entries: RevenueCost of Goods Sold Gross ProfitOperating Expenses Income before TaxesTaxes Net Income after Taxes 5

Business Technology Mr. Bernstein Comparing Income Statements shows trends … how is this helpful? 6

Business Technology Mr. Bernstein Balance Sheet Lists what the business owns and what it owes Assets = Liabilities + Owner’s Equity Assets: Cash, Equipment, Inventory, Accounts Receivable Liabilities: Long-term, Short-term loans, Accounts Payable 7