this is the process of estimating expected future cash flows of a project using only the relevant parts of the balance sheet and income statements.
Pro forma, a Latin term, literally means “for the sake of form” or “as a matter of form.” In the world of investing, pro forma refers to a method by which financial results are calculated. This method of calculation places emphasis on present or projected figures.
What is a pro forma financial statement?
A pro forma financial statement is one based on certain assumptions and projections. For example, a corporation might want to see the effects of three different financing options. Therefore, it prepares projected balance sheets, income statements, and statements of cash flows.