Connecting Balance Sheet Plugs: A New Integrated Presentation of Pro Forma Analysis
15 Pages Posted: 7 Sep 2011
Date Written: September 6, 2011
Using a “plug” figure or “slack term” within a pro forma analysis is the standard method to make a forecasted balance sheet have assets equal liabilities and equity. The plug is usually stock or long-term debt because either one or a combination of the two, are assumed to be the source of funding for sales growth. In this presentation, a mathematical connection between the two different plug figures is demonstrated allowing for a more integrated presentation of pro forma analysis rather than the perception of each type of plug belonging to a separate independent technique.
Keywords: pro forma analysis, equity plug, debt plug, debt-to-equity ratio, additional funds needed, circularity
JEL Classification: C00, C60, G00, G30, G31, M21
Suggested Citation: Suggested Citation