Pro Forma is a Latin term which means “for form” as per Merriam-Webster which came under the application in the 1580. At that time, there were two definitions served by Pro From: first, an initial requirement for description of items or for prescriptions; second, a formality which is also known as manner of perfunctory. But here we will consider pro forms as a model which we will use to judge the hypothetical future, finance scenario to be considered in particular. Corporate finance is judged under the pro formas of a company which means discussing and organizing an approach which is standardized to handle investors and finance issues in the firm.
We can understand the same with an example where we you will asked to prepare a business plan if you wish to propose a new project or idea to the board of directors team or in fact our senior manager. In your business plan, the most essential part to be considered will be “pro formas” sense of finance which will be further used as base line in order to discuss the project in a detailed manner.
Now the question here is who is responsible to produce pro formas? Other than entrepreneurs and managers, analysts who are responsible for acquisitions of investment banking are also responsible for producing the Pro formas of the project. The pro forms developed by analysts are different from that of entrepreneur. Though the history of corporate is available for the analysts but sometimes detailed knowledge about the company along with internal tactics and intention of corporate is sometimes difficult to seek.
This chapter will help you to produce pro formas but the perspective of every pro forma is different from analyst and investor point of view. Though every pro forma will be different for different type of firm, but a basic idea will help you develop professional business plan.