Pro Forma

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What It Means

A Pro Forma is a projection of financial results based on a number of assumptions. Buyers will develop Pro Forma financial statements to model the expected future revenues and cash flows a company may experience after an Acquisition. Pro Forma financial statements are similar to historical financial statements that companies normally keep, except they project the finances into the future.

Why It’s Important

The old saying “past performance is the best predictor of future success” holds true for a company’s financial performance. Buyers will, and should, look back at the historical financial performance and use those figures as the starting point for modeling the expected future financial performance of a company after an Acquisition. The better those future expectations look, the more valuable a company will be perceived by the Buyer.

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