Question

Which of the following is not how a pro forma financial statement is used?

A) to reflect the current business environment

B) to determine the amount of money needed for a future project

C) to predict future years’ operations

D) to analyze the effects of the firm’s forecasts on its financial performance

Answer 1

The answer is: A) to reflect the current business environment

Pro forma financial statement refers to the financial statement that is made based on assumption or projection. This mean that the financial planning is made based on how the future would look like according to our own opinion.

Current business environment cannot be considered as pro forma financial statement because it represent the situation that already happen. We does not need any projection to state current business environment.