pro forma statement showing projected results B u s i n e s s F i n a n c e
How can I respond to my peers discussion question responses? Each person’s response to the question needs to be answered individually with feedback or more information.
Question 1: Describe a benefit of developing a pro forma financial statement. Explain why this benefit would be helpful in a business.
Brandon said: The benefit of developing a pro forma financial statement is in the realm of business planning. Companies use pro forma statements when they are in the process of business planning and control (Inc., 2020). Due to the layout of pro forma statements and how they are presented, companies like to use pro forma invoices because they allow them to compare different business plans very easily. Analyzing the plans in this way lets them decide which is best due to the pro forma statement showing projected results of the competing plans (Inc., 2020).
This benefit would be helpful in a business because it helps the company decide which plan would be in their best interest to pursue. Obviously, businesses have a specific business model that they want to try to follow, and their plan coincides with that so it is very beneficial to be able to compare multiple so you know you have the best option.
Nanci said: Developing a Pro Forma financial statement is a key into forecasting the financial gains from a product or service that the company offers. This can be formulated on many different products from the market across the board. The company can look at data and sales from other companies that offer the same product or something of similar basis. One can evaluate its revenue and expenses and adjust the Pro Forma with regards to, but not limited to, is our product better, does it offer long term sales protection, ETC.
It would be beneficial to create these formulas and hypothesize the company’s revenue in order fund future endeavors and product creations. Advani R. (2018) made the statement that “Companies often use pro formas to show the impact of a planned transaction or to spell out expected results”. The forecast could allow one to adjust budget and may allow some wiggle room to improve the product. This may attract investors when they see the possible financial gains the company could exploit. There a so many great reasons to create a pro forma statement. One thing is that is very important is Data analytics and how to navigate through the process from start to finish.
Geraldine said: The benefit of developing a pro forma financial statement is to help business, specifically start up business plan strategically in making sure they are financially profitable in all stages of their business development. This would be a prediction laid out on how to make sure the business would profit and what can be done to make sure of it. This method gives the business the opportunity to be proactive. This benefit would be helpful in a business because it could help plan the year(s) to come so that if there are any changes whether good or bad it could be caught and factored into the outcome later within the business. It gives investors and financial resources an idea of what or how their would profit and provides some reassurance for overall growth with the company. “An analysis of the feasibility of a project idea can determine whether the investment to be made will be successful or the investment decision can generate loss of money, resources, time, the project proving to be unprofitable”(Melnic, 2017).
Question 2: An entrepreneur develops a new business and bears the financial risks and benefits. Besides financial returns, what other responsibilities does the entrepreneur have? Besides investors, what other stakeholders does the entrepreneur have to be mindful of?
Jackson said: Setting strategy and having a company plan are other responsibilities of entrepreneur of a new business. Their firms’ goal and mission are established by them. Entrepreneurs maintain track of market trends, rivals, and changing client tastes and demands as part of their planning and strategy. After all, any effective entrepreneur understands the importance of providing what the market desires and is ready to pay for.
Aside investors, other stakeholders that the entrepreneur need to be mindful of are employees, customers, suppliers, communities, and regulators. Without the support of this group an organization will cease to exist.
Darius said: Surely as an entrepreneur there are other responsibilities besides financial risks and returns. Another responsibility that entrepreneur has are “being knowledgeable about teaching and learning. Education entrepreneurship is fundamentally about having an impact on how learners learn.” (leanlabeducation.org, 2021). “Successful education entrepreneurs should have deep subject matter expertise and truly understand the principles of learning and pedagogical best practices” (leanlabeducation.org, 2021). This aspect is especially important because as your business grows, your team grows, and you want your team to have the same qualities as its foundation.
Besides investors, entrepreneurs have to be mindful of “customers, suppliers, employees, shareholders and local communities” (D’Souza, 2021). “Under this system, a company’s purpose is to create long-term value and not to maximize profits and enhance shareholder value at the cost of other stakeholder groups” (D’Souza, 2021)
Katherine said: The entrepreneur holds responsibilities to more than just himself and the company he created. Other responsibilities that the entrepreneur has are to the stock holders, to the vendors, to the people affected by the business etc. My brother in law is an entrepreneur and one project among many that were on his plate was to renovate a building to create a food hall type space. There were businesses that were going to be moving into the space once the renovations were done. During the renovation process he employed many people to help do various projects. There were times when they lost an investor or a business that was going to move in decided not to. He was constantly having to ensure that all the parts were working to make it to the opening day. There was also the public that needed to be considered. This building that was being renovated was historic and a part of that city landscape for decades. There was a lot of input from the people in the area before major renovations occurred. A business may be dreamed up and created by one person but there are always many other people to consider.
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