Not everything on the pro forma statement is set in stone. As you finish out the calculations, make sure to adjust certain values so that they line up correctly and follow the accounting equation.
- [Instructor] As you can see, we have an issue…with the current assets.…Negative cashflow is not appealing to investors.…So while it's okay for a growing company…to have limited cashflow or a little bit of cashflow,…nobody really likes to see the red.…So let's make some adjustments in our predictions…in 03_08_BS_Begin.…It seems like a lot of cash is going…toward purchasing PP&E, which I can see in row 16 here.…It may be in our best interest then to say, perhaps,…investing in that much property…and equipment is not a good idea.…
On the other hand, if we're predicting growth…and Richards will definitely need to invest in equipment,…we can look into getting more loans.…If we increase the amount of liabilities we have…in accordance with the accounting equation,…we can also increase our assets, so let's do that.…I'm going to pretend that we have great credit…and we can increase our loan amount.…So maybe we can take out loans…for the extra projected PP&E.…So for projected 2019 in column E,…I'm going to come down to other long-term debt.…
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- Explain the four different types of financial statements.
- Distinguish between the types of moving averages.
- Determine a seasonal adjusted trend.
- Break down pro-forma financial statements.
- Identify cash flows, and what increased liabilities and decreased earnings generally indicate.
- Tell what a regression is.
- Outline the naive approach.