Business Technology

Mr. Bernstein

Greene, pp 246-252:Pro Forma Financial Statements

December 4, 2013

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Business TechnologyMr. 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 StatementPro Forma Income StatementPro Forma Balance Sheet

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Business TechnologyMr. Bernstein

Cash Flow StatementDescribes cash flows into and out of the business,

known as receipts and disbursementsCash 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), depreciationSales on credit (accounts receivable)

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Business TechnologyMr. Bernstein

Pro Forma Cash Flow Statement Walters Electric

January-June 2014

Jan Feb Mar Apr May Jun

Cash Receipts $4,200 $5,410 $5,750 $6,320 $7,375 $8,130

Cash Disbursements:

Cost of Goods $2,400 $2,520 $2,520 $2,640 $3,300 $3,480

Rent $900 $900 $900 $900 $900 $900

Utilities $100 $100 $100 $100 $100 $100

Salaries $2,000 $2,000 $2,000 $2,000 $2,000 $2,000

Advertising $700 $700 $700 $700 $700 $700

Supplies $100 $115 $130 $150 $150 $150

Insurance $75 $75 $75 $75 $75 $75

Payroll Taxes $175 $175 $175 $175 $175 $175

Other $50 $50 $50 $50 $50 $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

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Business TechnologyMr. Bernstein

Income StatementShows revenues and expense over timeProduces the Profit or Loss for the time periodIncludes revenues you have not yet received and expenses you

have not yet paidKey Entries:

Revenue Cost of Goods SoldGross Profit Operating ExpensesIncome before Taxes TaxesNet Income after Taxes

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Business TechnologyMr. Bernstein

Comparing Income Statements shows trends

…how is this helpful?

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Business TechnologyMr. Bernstein

Balance SheetLists what the business owns and what it owesAssets = Liabilities + Owner’s Equity

Assets: Cash, Equipment, Inventory, Accounts ReceivableLiabilities: Long-term, Short-term loans, Accounts Payable