Asked by Simon Kozloff on Jun 29, 2024
Verified
By compiling pro forma statements, firms can:
A) Ensure that their anticipated rate of growth will in fact occur.
B) Avoid increasing their level of financial leverage while still increasing the growth rate of the firm.
C) See the projected effects of their planned activities.
D) Determine how to grow at a rate that exceeds their sustainable rate of growth without increasing their equity financing.
E) Reduce the daily level of management involvement in the operations of the firm.
Pro Forma Statements
Financial statements that project a company's financial performance in the future, based on certain assumptions and adding or excluding non-recurring items.
Anticipated Rate of Growth
The expected annual increase in a company's revenue or profit, often expressed as a percentage.
Financial Leverage
The use of borrowed funds with a fixed cost to finance the assets of the business to increase the potential return to shareholders.
- Gain an appreciation of the role and components of pro forma statements within financial planning.
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Learning Objectives
- Gain an appreciation of the role and components of pro forma statements within financial planning.
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