Pro forma cash flow information is useful for estimating when there may be cash shortages in the near future, so that management can prepare by obtaining additional debt or equity funding to offset the projected shortfall. Another alternative is to plan for expenditure reductions in order to avoid future cash usage.

What is the importance of pro forma?

Pro forma income statements are important because of the information they can offer a company. If, for example, it is preparing to produce new goods, the financial statements can help forecast if producing the new goods will cause expenses to increase.

What is proforma cash flow?

Pro Forma Cash Flow Statement is a popular accounting practice that reports a voluntary statement prepared by a firm for presenting financial projections. It can be defined as the probable amount of cash inflows and outflows expected in future periods for a specific duration of time.