![]() ![]() Step 2: We consider current (observed) sales and determine a forecasted growth rate to arrive at a projected revenue number. For example, raw materials used and labor costs typically increase as sales increase. We should notice that many expenses are related to the level of sales, that is, they have similar entries in each year of the common size statement. where each entry is expressed as a percentage of revenue.Įquation 5.1 Calculating percentage of sales X a s a p e r c e n t o f s a l e s = X S a l e s Step 1: We create a common size income statement A income statement with all entries expressed as a percentage of revenues. In a nutshell, future sales are forecasted, and then expenses are calculated as a percentage of the new sales figure. The simplest method used to prepare a pro forma income statement is to use the percent-of-sales method Future sales are forecasted, and then expenses are calculated as a percentage of the new sales figure. Pro forma statements typically only forecast operating items on the income statement such as sales and EBIT, and not any items generated by financing or investing flows. A pro forma income statement shows what potential sales revenue, expenses, taxes and depreciation might look like. is a projected income statement which shows predicted future operating cash flow. Analyze a pro forma income Statement and its purpose.Ī pro forma income statement A projected income statement. ![]() zip file containing this book to use offline, simply click here. You can browse or download additional books there. More information is available on this project's attribution page.įor more information on the source of this book, or why it is available for free, please see the project's home page. Additionally, per the publisher's request, their name has been removed in some passages. However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. Normally, the author and publisher would be credited here. This content was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz in an effort to preserve the availability of this book. See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and do make it available to everyone else under the same terms. This book is licensed under a Creative Commons by-nc-sa 3.0 license. ![]()
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