What are pro forma financial statements?

Definition of Pro Forma Financial Statement

A pro forma financial statement is one based on certain assumptions and projections (as opposed to the typical financial statement based on actual past transactions).

Example of Pro Forma Financial Statement

A corporation may want to see the effects of three possible financing options. Therefore, it prepares a projected balance sheet, income statement, and statement of cash flows for each of the three financing options. These projected financial statements are referred to as pro forma financial statements.