Simple English definitions for legal terms
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Definition: Pro forma earnings are a type of business income that is calculated by including certain income items and excluding various business expenses. This calculation is done in violation of generally accepted accounting principles and is often used to artificially inflate a company's price-earnings ratio.
Examples:
These examples illustrate how pro forma earnings can be used to manipulate a company's financial statements and make its earnings look better than they actually are. This can be misleading to investors and can lead to inflated stock prices.