Development of pro forma financial statements helps a financial manager to project the amount of external financing required to support a given level of sales as well as overall financial performance of the firm in the coming year.

Question

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Pro forma financial statements are used to project the financial performance of a business for the upcoming year. By analyzing the projected income statement, balance sheet, and cash flow statement, financial managers can determine the amount of external financing that may be needed to achieve a certain level of sales and overall performance.

Development of Pro Forma Financial Statements Helps a Financial Manager