What does the term 'pro forma' refer to in a business context?

In a business context, 'pro forma' refers to a projection of future revenues and costs. This type of financial statement is typically used to estimate the financial outcomes of projects or business operations under certain assumptions. Pro forma statements can help businesses and investors understand potential future performance and make informed decisions based on these forecasts.

For example, when a company is considering a new project, it may create a pro forma income statement to project anticipated revenues and expenses associated with that project. This allows stakeholders to assess the feasibility and potential profitability of the business venture before it is officially pursued.

Other options do not accurately describe the essence of what 'pro forma' represents. Historical financial statements focus on past performance, legal documents pertain to the formation and registration of a business rather than projections, and business strategies involving market analysis describe broader planning activities rather than specific financial forecasts.