Why might investors seek pro-forma financial statements?

Investors often seek pro-forma financial statements primarily to evaluate potential based on assumptions and projections. Pro-forma statements present a projected financial position that reflects future expectations or hypothetical scenarios rather than historical performance. These statements are valuable in assessing how a company might perform under certain conditions, such as a merger, acquisition, or significant change in business activities.

By using pro-forma financials, investors can gain insight into a company’s future earnings potential and cash flow generation, which aids in decision-making for investment or financing. They are particularly useful in understanding the possible outcomes of strategic initiatives and can highlight areas of strength and risk that may not be immediately visible in traditional financial reports. This perspective is especially beneficial in dynamic industries where future performance may vary significantly from past results.

Other choices, while relevant to the broad realm of financial analysis, do not align with the specific purpose of pro-forma statements. For example, analyzing a company's past performance refers to traditional financial statements that show historical data, and reviewing concrete financial results requires reliance on actual figures rather than projections. Preparing for audits also typically involves standard financial statements rather than pro-forma projections.