Pro forma is a Latin term meaning "for the sake of form." In the investing world, in which the term is most commonly used, it is used to describe a projection of past, present and future financial projections. These projections are furnished to interested parties, often when mergers are being considered or new business plans are being drawn up.

Projections

A pro forma disclosure is often made to project anticipated revenue and expenditures a new business is expected to create.

Invoices

Pro forma invoices are often made to project what the cost of an actual invoice will be, should a company or an individual place an order. The supplier will provide the potential buyer with the pro forma invoice in the hope that the buyer will make an actual order based on the costs projected in the pro forma invoice.

Disclosures

When investors or those in charge of potential mergers want information about a companies financial dealings, particularly projected financial dealings, they are often provided with pro forma disclosures. These detail what has happened, is happening and what is likely to take place in the future.

Court

Judges often give pro forma rulings in order to keep a case moving forward. Usually, a judge issues a pro forma judgment meaning that the matter is not considered resolved, but that it is assumed that it will be resolved in a certain manner and the case can move forward with that assumption. The pro forma decision can be revisited and changed at any time.

Problems

When a company is asked to project income, there is often some "fudging" to make the company's future appear rosy. A lot of the financial meltdown of banks and businesses are blamed partially on institutions' projecting unrealistic financial projections in the form of pro forma disclosures.

Source:

Investopedia.com: Terms

Medicineprogram.com: Pro Forma

Legal-dictionary.com: Pro Forma

More Information:

Cfo.com: Anti Pro Forma

Answerbag.com: Pro Forma Answers

Allbusiness.com: Glossaries Pro Forma