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Forecasting Financial Statements > Forecasting the Balance Sheet
Forecasting the Balance Sheet
• Pro Forma Balance Sheet
• Balance Sheet Analysis
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Forecasting Financial Statements > Forecasting the Balance Sheet
Pro Forma Balance Sheet
• The pro forma accounting is a statement of the company's financial activities
while excluding "unusual and nonrecurring transactions" when stating how much
money the company actually made.
• In business, pro forma financial statements are prepared in advance of a planned
transaction, such as a merger, an acquisition, a new capital investment, or a
change in capital structure such as incurrence of new debt or issuance of equity.
• Pro forma figures should be clearly labeled as such and the reason for any
deviation from reported past figures clearly explained.
Balance Sheet
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Forecasting Financial Statements > Forecasting the Balance Sheet
Balance Sheet Analysis
• Balance sheet is a summary of the financial balances of a sole proprietorship, a
business partnership, a corporation or other business organization. Assets,
liabilities and ownership equity are listed as of a specific date, such as the end of
its financial year.
• Balance sheet analysis (or financial analysis) the process of understanding the
risk and profitability of a firm (business, sub-business or project) through analysis
of reported financial information, particularly annual and quarterly reports.
• Financial ratio analysis should be based on regrouped and adjusted financial
statements. Two types of ratio analysis are performed: 3.1) Analysis of risk and
3.2) analysis of profitability.
Balance sheet
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• Balance sheet analysis consists of 1) reformulating reported Balance sheet, 2)
analysis and adjustments of measurement errors, and 3) financial ratio analysis
on the basis of reformulated and adjusted Balance sheet.
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Appendix
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Forecasting Financial Statements
Key terms
• a merger, an acquisition Mergers and acquisitions (abbreviated M&A) is an aspect of corporate strategy, corporate finance, and
management dealing with the buying, selling, dividing, and combining of different companies and similar entities that can help
an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other
child entity or using a joint venture.
• intangible assets Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched, or physically
measured. They are created through time and effort, and are identifiable as a separate asset.
• NFD net financial debt
• NFIR the net financial interest rate
• RNOA return on net operating assets
• warranties In business and legal transactions, a warranty is an assurance by one party to the other party that specific facts or
conditions are true or will happen. The other party is permitted to rely on that assurance and seek some type of remedy if it is
not true or followed.
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Forecasting Financial Statements
Balance Sheet
Simple balance sheet including basic items
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Understanding Accounting. "Simple Balance Sheet and Income Statement Example." CC BY http://www.understand-accounting.net/simplebalancesheet.html View
on Boundless.com
Forecasting Financial Statements
Balance sheet
Classified balance sheet
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Forecasting Financial Statements
Which of the following statements regarding pro forma financial
statements is correct?
A) Pro forma statements are used quarterly to project future financial
activity.
B) Pro forma balance sheets should focus on assets only.
C) All of these answers.
D) Pro form statements summarize the projected future status of a
company based on current statements.
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Forecasting Financial Statements
Which of the following statements regarding pro forma financial
statements is correct?
A) Pro forma statements are used quarterly to project future financial
activity.
B) Pro forma balance sheets should focus on assets only.
C) All of these answers.
D) Pro form statements summarize the projected future status of a
company based on current statements.
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Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Forecasting Financial Statements
Balance analysis is primarily based on ratios. Which of the
following statements regarding ratio analysis associated with
balance sheets is correct?
A) Liquidity analysis analyzes whether a firm can recover from a loss or
losses.
B) Solvency analysis analyzes whether a firm can meet its financial
obligations.
C) Profitability analysis concerns return on capital: risk analysis concerns
credit risk.
D) All of these answers.
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Forecasting Financial Statements
Balance analysis is primarily based on ratios. Which of the
following statements regarding ratio analysis associated with
balance sheets is correct?
A) Liquidity analysis analyzes whether a firm can recover from a loss or
losses.
B) Solvency analysis analyzes whether a firm can meet its financial
obligations.
C) Profitability analysis concerns return on capital: risk analysis concerns
credit risk.
D) All of these answers.
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Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Forecasting Financial Statements
Attribution
• Wikipedia. "Balance sheet." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Balance_sheet
• Wikipedia. "Pro forma." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Pro_forma
• Wikipedia. "warranties." CC BY-SA 3.0 http://en.wikipedia.org/wiki/warranties
• Wikipedia. "intangible assets." CC BY-SA 3.0 http://en.wikipedia.org/wiki/intangible%20assets
• Wikipedia. "a merger, an acquisition." CC BY-SA 3.0 http://en.wikipedia.org/wiki/a%20merger,%20an%20acquisition
• Wikipedia. "Balance sheet." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Balance_sheet
• Wikipedia. "Financial statement analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_statement_analysis
• Wikipedia. "Financial statement." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_statement
• Wikipedia. "RNOA." CC BY-SA 3.0 http://en.wikipedia.org/wiki/RNOA
• Wikipedia. "NFD." CC BY-SA 3.0 http://en.wikipedia.org/wiki/NFD
• Wikipedia. "NFIR." CC BY-SA 3.0 http://en.wikipedia.org/wiki/NFIR
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