Relevance of a pro forma statement as a
Relevance of a pro forma statement as a decision-making tool.
Before starting this assignment, make sure to read the article Pro
Forma Financial Statements: An Illustrative Example (WHICH IS
BELOW). Write a 1-page paper analyzing the relevance of a pro
forma statement as a decision-making tool.
Pro forma financial statements i are a type of accounting
engagement that gives the customer an idea of what his or her
financial statements would look like if certain specific,
predetermined strategic decisions are made that will affect
financial performance of the customer firm. For example, a
customer may order pro forma financial statements for a scenario
in which the customer will consolidate three offices into one
centralized location and purchase a building. Alternatively, a
customer may order pro forma financial statements to report what
would have happened to the company if a certain decision had
been made. Pro forma financials are the standard financial
statements – income statement, balance sheet, cash flow
statement, etc. – except that they are based on hypothetical
criteria or a “what if” scenario provided by the client.
To illustrate the use of pro forma financial statements, I’m going to
look at what the truck manufacturer Mack Trucks, Inc. would have