Question

How to develop pessimistic and optimistic pro forma statements of comprehensive income?

Answer 1

Pro forma statement for comprehensive income will be including all the income expectations of the companies because this proforma statement will be a futuristic statement to attract various prospective investors.

Optimistic proforma statement can be prepared by having optimistic growth and income targets because when there will be higher forecasting revenue then it will be helping the management to have a higher profits and managers will always be trying to look for higher revenues and lower cost in order to arrive at higher profitability which will be reflecting their optimism in the future and they will also estimate higher growth rate of their profits and revenues so that that can help them to have optimistic targets and attract prospective investors. They will be trying to lower their cost and expenditure and they will be trying to inflate their earnings so that they look optimistically higher and they will be trying to attract various prospective investors.

Pessimistic pro forma statement can be prepared by underestimation of sales and underestimation of profits by the company and they will be trying to underestimate the growth rate also and they will be trying to overstate the overall cost related to the company so it will be helping the company in order to have a conservative future guidance for its prospective investors and they are likely to surprise their investors more in real scenarios when the investment will be made, so pessimistic pro forma statement is another way of attracting Investors.