Question

Use the following information to answer the question below:

Answer 1

Answer:

d) All of the above

Explanation:

Pro forma income statements are basically estimated or expected income statements which do not necessarily comply with US GAAP norms (are not useful in legal terms), but should reflect future outcomes.

In this case, Acquirer didn't simply decide to purchase Target and carried the operation immediately. The process is long and complicated and many times companies negotiate fair values and future cash flows. If you analyze the acquisition process of Whole Foods by Amazon it is very interesting. After negotiations Amazon paid 4 times the capitalization value of Whole Foods.

Before the actual process ends, Acquirer should present a pro forma statement and it must include all the relevant issues about the merger. They already know how much the transaction will cost, what actions will be taken to increase profits and any other major event.