Pro forma financial statements are forward-looking projections that show what the business’s finances would look like under a set of stated assumptions. A pro forma income statement projects future revenue, costs, and profit. A pro forma cash flow statement projects future cash inflows and outflows. A pro forma balance sheet projects future assets, liabilities, and equity.
The word “pro forma” (Latin: “as a matter of form”) signals that the numbers are projected, not actual. This distinction matters: actual financial statements report what happened; pro forma statements estimate what will happen if the assumptions hold.
Pro forma statements are central to financial projections and the business plan. They are only as credible as their underlying assumptions — which is why assumptions should be listed separately and justified. A pro forma income statement that projects 20% year-over-year revenue growth is a guess; one that projects growth based on adding catering services ($1,500/week by month 6, supported by two signed letters of intent) is an argument.
See Building Financial Projections for how to construct pro forma statements.