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Pro Forma Analysis: For each of the six performance criteria: SALES, NET INCOME, ROA, ROE, and STOCK PRICE state a specific goals/objectives, and compare your proforma results in your financial...

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Pro Forma Analysis: For each of the six performance criteria: SALES, NET INCOME, ROA, ROE, and STOCK PRICE state a specific goals/objectives, and compare your proforma results in your financial statements with the Goals/Objectives:

This tests whether your plan works (i.e., whether it achieves your objectives). For example: if your objective was to achieve Net Income of $5,000,000 in Year 5 and $8,000,000 in Year 6, compare the Net income from the pro forma with these two objectives. State whether your objectives are met by your plan.

Although Stock Price cannot be measured directly from your pro forma statements, it can be estimated indirectly. Calculate your historical Price-to-Earnings Ratio (i.e., P/E Ratio) and use that ratio with your proforma earnings to estimate your future stock price.


***I am attaching Pro Forma Finacial Statements and Actuals (Historical) Financial Statements.


Ignore Actual Y5Q1 use proforma. Forcast is for Y5Q1-Y6Q4


Answered Same Day Apr 08, 2021

Solution

Preeta answered on Apr 08 2021
158 Votes
Introduction:
A pro forma analysis is a type of financial forecasting of the position of the company in the near future based on the historical performance of the company (Penman 2013). The potential changes in the financial scenario of the company and the industry it is operating in are also taken into consideration. It is a kind of financial review.
In this research project, analysis has been done for the six performance indicators, which are sales, ROA, net income, ROE and stock price for the given company. The actual results have been compared with the pro forma result to understand the deviation and reason for the deviation as per the set goals and objectives. Both the pro forma and the actual results could be obtained for only year 5, first quarter. So, only that value has been compared. Assumptions will be made regarding the strategies and goals of the company based on the pro forma made for quarter 2, 3 and 4 of year 5 along with quarter 1, 2, 3 and 4 of year 6.
1. Sales:
Sales are one of the primary performance indicators. A business operates to maximize its sales and earn revenue over a certain period of time (Sagaert et al 2018). The comparison between pro forma sales and actual sales has been shown below:
    Particulars
    Pro Forma
    Actual
    Year 5
    Quarter 1
    5420
    5243
The values show that the actual figure is 177 short from the pro forma. The company needs to improve its sales if it has to meet the target or objective. So, for the cu
ent quarter, the company actually failed to meet the objective.
The rest of the pro forma assumptions have been shown below:
    Particulars
    Pro Forma Value
    
Year 5
    Quarter 2
    0
    
    Quarter 3
    5954
    
    Quarter 4
    8086
    
Year 6
    Quarter 1
    6880
    
    Quarter 2
    7662
    
    Quarter 3
    7194
    
    Quarter 4
    9767
The analysis revealed that the overall objective of the company is to increase its sales but there are some fluctuations. For instance in the quarter 2 of year 5, the sales have been shown to be absolutely nil. This can happen only if the company is closed for the full month due to some unavoidable reasons. But then the sales increases. Again in quarter 1 and quarter 3 of year 6, the sales might fall which may be due to some external market condition.
2. Net Income:
A company operates to generate net income that is profit. A business organization cannot sustain in the long run without generating profits (Velimirović et al....
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