A pro forma income statement is very similar to typical income statement, however it predicts the future predictions of financial stability and/or growth for a business. The pro forma is especially important in forecasting and/or planning futuristic business functions. I find it ironic that I am ending this financial course focusing on forecasting and pro forma statements, which both must be done before end of the present year for the following year. To estimate and present a pro forma statement for the business I chose, which is Apple, I must first review an income statement for the year of 2014 for Apple. This will consist of an estimation of expenses and final sales for 2014, in order to create the pro forma statement for 2015 and so forth.
Let’s focus on the key assumptions for the Pro Forma Cash Flow Chart for Apple provided below. Let’s assume Apple’s current market size consists of 1,000,000.00 users worldwide and will grow by 25% annually through 2017. The market penetration percentages will consist of 1.5% for 2015 2% for 2016, and 2.5 for 2017. All amounts are fictitious amounts formulated for a forecasted trajectory for APPLE INC.
For my estimated pro forma statement I used percentages of sales ratio with no real inflation rate just an overall assumption of an increase within the overall cash flow pro forma. There is also no stated interest rate for debt financing. Everything done within the below pro forma was explained above, prior to completing the statement. Apple is definitely a financially stable organization. The growth within the pro forma is based upon APPLE’s 2014 Cash Flow Statement. At this time, I have not unveiled any large enough risks to create an obstacle for investors. I honestly expect for Apple to continue to grow as a strong business for many more years to come. However, we cannot successfully predict what will happen to a company in 30-50 years as we may not even be around that long, and cannot...