Your pro forma income statement shows sales of $ 966,000 , cost of goods sold as $ 522,000 , depreciation expense of $ 105,000 , and taxes of $ 135,600 due to a tax rate of 40 %. What are your pro forma earnings? What is your pro forma free cash flow?

The pro forma earnings are $203,400

The pro forma free cash flow is $308,400

Explanation:

The pro forma income statement shows sales of $966,000 , cost of goods sold as $522,000 , depreciation expense of $105,000 , and taxes of $135,600.

The pro forma earnings = Sales - cost of goods sold - depreciation expense - taxes = $966,000 - $522,000 - $105,000 - $135,600 = $203,400

The pro forma free cash flow = Sales - cost of goods sold - taxes = $966,000 - $522,000 - $135,600 = $308,400

Note: Depreciation is a non-cash accounting expense, so it doesn't involve cash flow.