Pro Forma Statement Essay

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In this essay these issues will be discussed: Financial tools from chapter 5 that can help make better financial decisions, components of a comprehensive budget, purpose of each component, how are specialized budgets prepared?, and the relationship of specialized budgets to the comprehensive budget.
Financial tools that can help make better financial decisions

There are financial tools that can help make better financial decisions. One of these tools is the pro forma statement. The pro forma statement is based on certain assumptions and projections. Examples of pro forma statement include: balance sheets, income statements, and statements of cash flows. The pro forma statement provides a look at the potential results of financial decisions. …show more content…

Budgets are the financial requirements and consequences of plans. Budgets are made with specific goals in mind. Budgets can be used to lower living expenses, increase savings, or to save for a purpose such as: education or retirement. Budgeting is a process that involves these actions: defining goals, gathering information, forming expectations, reconciling goals and data, monitoring goals and variances, adjusting budgets, and redefining goals.
Reviewing your current financial condition can help with planning present and future goals. Budgets should be made in a conservative manner by overestimating costs and underestimating earnings.
A cash flow statement is another tool that can help with financial decisions. Cash flows that are not regular can put on the statement, on certain months when they occur. This allows one to see the impact of cash flow timing more transparently. The cash flow budget makes risk …show more content…

Incomes that are recurring are in part by selling labor and or liquidity. Recurring expenses derive from consumption of goods and or services. Recurring incomes and expenses fulfill short-term lifestyle goals, and makes free cash flows. To project recurring incomes and expenses some actions need to take place. These actions include using: financial history, new information, microeconomic and macroeconomic factors.
The purpose of a capital budget is for nonrecurring items. Capital expenditures involve long- term plans and goals. To project capital expenditures some course of action should take place which includes: new information, microeconomic factors, macroeconomic factors, and the time value of money.
How are specialized budgets prepared?

Specialized budgets are prepared with detailed information in reference to timing and cash flows. Specialized budgets main focus is on a certain asset or activity. For example a tax budget is frequently used to watch activities that are taxable.
What is the relationship of specialized budgets to the comprehensive

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