Corporate Finance PowerPoint presentation. In this presentation we will discuss a pro forma balance sheet or budgeted balance sheet. Get ready, it’s time to take your chance with corporate finance pro forma balance sheet. As we think about the pro forma or budgeted balance sheet, let’s take a step back and see where it fits in with our projections with our pro forma statements, you’ll recall that the place we need to start then is going to be the sales projections, we need the sales projection, we’re first going to think about how far we’re going basically the activity type of statement. And then we’ll take that change that activity statement how far we went, like miles driven in and our income statement, and then we’ll tack on the beginning balance where the odometer was at at the beginning to get to the ending point, which is going to be the ending balance sheet.
00:47
So to see that we’re going to start off with the sales projections, then we got to do the production budget so that we can think about basically how much we’re going to produce or what inventory we need to buy. In order to do the production process. Once we have those components, we can start thinking about the income statement, which is our performance statement, we’re projecting out what the performance will be how far we will go, how much revenue we will generate, how many expenses we will incur what our net income will be. Then we’ll think about our cash budget information, which we’ll think about the cash flow project and take into consideration the other components that might be involved in cash flow, including capital budget type of type of activities, like purchasing of property, plant, and equipment.
01:29
Once we have this information, then we can say okay, now we’ve seen how far we have gone, basically how many miles we have driven, we can now take a look at the starting point where the odometer was at at the beginning prior year balance sheet in this case, and we can use that then to be creating the balance sheet at the end of the time period that’ll be constructing where we stand. What’s our ending point? Where are we standing now, after our projections about what is going to happen, we assume them to happen, we assume that is where we will be. That’s going to be the major layout with the balance sheet that you want to consider. And then really to get an understanding of the balance sheets, you got to go through the budgeting process, we’ll have example problems for the budgeting process, highly recommend going through those example problems both in Excel and in just presentation format that we’ll do in OneNote presentation. So the pro forma balance sheet will be created from the prior period, balance sheet, pro forma income statement and cash budget.
02:24
So the main thing we just want to emphasize here is that the balance sheet is going to have to be constructed after everything else, basically, because that’s going to be where we stand where the end point is. And in order to get there, we need to first think about how far we went how what we think our performance will be how far we think we’re going to be able to run how many miles we think we’re going to be able to go in the next year. In other words, how much revenue we’re going to have, how much expenses, we think we’re going to incur what’s going to be the net income, how far are we going to get and the cash flow related to those items. So some of the balance sheet, some of the balance sheet amounts may not change from the prior year. So just recognize when we think about the balance sheet, we may have some items on the balance sheet that aren’t going to have a lot of activity, a lot of change from one period to the next period. And we might have some accounts that are going to have a lot of change.
03:12
Obviously when when we think about the difference between the net income it’s going to be recorded on basically the equity sections, the equity section in retained earnings is going to change in relation to the income and obviously we’re focusing in on the cash flow as well with our cash flow statement, which is going to be an item on the cash flow. You would think that accounts receivable accounts payable as well as current assets and liabilities would typically change. Things that are long term may not have as much effect on them on the balance sheet. So once again, we’ll go through the process of putting these things together. I highly recommend working these through in practice problems.