What term describes proposed or estimated financial statements based on predictions of how operations will turn out?

• A. Pro forma
• B. Bootstrapping
• C. Venture Capital
• D. Line of Credit

Answer: (A)

Pro forma statements are forward-looking financials that show what the company’s income statement, balance sheet, and cash flow would look like under certain predicted operating results. They’re used in planning, budgeting, and presenting to lenders or investors to illustrate expected performance before actual results are known. This makes the term a perfect fit for “proposed or estimated financial statements based on predictions of how operations will turn out.”

Bootstrapping refers to funding a startup with personal resources, venture capital is external investor funding, and a line of credit is a borrowing facility. Those terms describe funding methods or financing arrangements, not forecasted financial documents.