What does a "pro forma statement" provide?

A pro forma statement primarily serves the purpose of providing financial projections that estimate asset value or potential return. These statements are typically created as part of the planning process for a business or investment and can include forecasts of future revenues, expenses, and cash flows. By utilizing a pro forma statement, stakeholders can evaluate the financial viability of a project or investment, helping them make informed decisions based on anticipated outcomes rather than just historical performance or current conditions.

Such statements are crucial for investors and lenders as they offer insights into what the projected financial performance might look like, aiding in the assessment of risks and opportunities involved. Since pro forma statements focus on future expectations, they are distinct from historical records, evaluations of market conditions, or summaries of current financial situations, which serve different functions in financial analysis and reporting.