pro forma

Pro forma

A financial projection based on assumptions. Also, refers to a statement of income and balance sheets that exclude non-recurring items.

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Pro Forma Financial Statement

A financial statement that a company prepares to consider the effects of a potential activity. For example, if a company is considering acquiring another, it may prepare a pro forma financial statement to estimate what effect the acquisition would have on its own financial circumstances. A pro forma financial statement can be part of the risk analysis of a situation. See also: Due diligence.

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pro forma

See pro forma statement.

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Pro Forma

What Does Pro Forma Mean?

A Latin term meaning “for the sake of form.” In the investing world, it is used to describe a method of calculating financial results to emphasize either current or projected figures.

Investopedia explains Pro Forma

Pro forma financial statements could be designed to reflect a proposed change, such as a merger or acquisition, or to emphasize certain figures when a company issues an earnings announcement to the public. Investors should be careful when reading a company's pro forma financial statements, as the figures may not comply with generally accepted accounting principles (GAAP). In some cases, the pro forma figures may differ greatly from those derived from GAAP.

Related Terms:
• Balance Sheet
• Earnings
• Generally Accepted Accounting Principles—GAAP
• Income Statement
• Retained Earnings