Listen to a Business English Dialogue About Pro forma
Isla: Hi Jade, have you heard about “pro forma” in business and finance?
Jade: No, what is it?
Isla: Pro forma refers to financial statements or projections that estimate future performance, typically used to assess the potential impact of certain events or decisions on a company’s finances.
Jade: Oh, I see. So, it’s like making predictions about how a company might perform in the future?
Isla: Exactly. Pro forma statements often exclude certain one-time expenses or revenue items to provide a clearer picture of ongoing operations.
Jade: Are there any specific reasons why companies use pro forma statements?
Isla: Yes, companies may use pro forma statements for various purposes, such as forecasting future earnings, evaluating the financial impact of acquisitions or divestitures, or preparing for potential changes in the business environment.
Jade: That makes sense. How reliable are pro forma statements for predicting future performance?
Isla: Pro forma statements can be useful for providing insights into potential trends or outcomes, but they are based on assumptions and estimates, so their accuracy depends on the quality of the underlying data and the validity of the assumptions made.
Jade: Thanks for explaining, Isla. Pro forma statements seem like a valuable tool for companies to plan and strategize.
Isla: No problem, Jade. They can help companies anticipate and prepare for future financial scenarios, but it’s essential to use them alongside other financial analysis techniques for a comprehensive view.