Pro forma financial statements provide a framework for analyzing the impact of the firm's plans on the financing needs of the company.

Question

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Pro forma financial statements are used to project the future financial performance of a company based on certain assumptions or plans. By providing a forecast of future financial results, pro forma statements can help identify potential financing needs, such as additional capital necessary for expansion or debt reduction to improve financial stability.

Pro Forma Financial Statements Provide a Framework for Analyzing the Impact