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    Importance of pro forma financial statements

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    Why is it important for firms to use pro forma income statements, balance sheets, cash flows, and ratios? Also, discuss the areas that are effected the most by decreases and increases in all statements.

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    Pro forma income statements, balance sheets, and cash flows are useful for forecasting the amount of external financing that will be required in the future. These evaluate the impact that changes in the operating plan have on the value of firm and helps set appropriate targets for compensation plans.

    Financial ratios are helpful in understanding the financial statements, assessing financial health of the business ...

    Solution Summary

    The importance of pro forma financial statements is outlined in a few paragraphs.