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Test your basic knowledge |
Financial Forecasting
Start Test
Study First
Subject
:
business-skills
Instructions:
Answer 21 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Projected Total Assets - Projected Total Liabilities - Projected Owner's Equity
Forecasting RE Formula
Plowback Ratio
DFN Formula
Spontaneous Accounts
2. RE = Old RE + Change in RE (NI - Dividends)
Payout Ratio
Forecasting RE Formula
Classic RE Formula
Total Financing Need
3. = 1 - (B - Payout Ratio) (This is the flipside of the payout ratio)
What accounts don't necessarily fall under either spontaneous or non-spontaneous?
4 Ways to Decrease the DFN
Plowback Ratio
DFN Formula
4. Future RE = Old RE + Projected Sales X Net Margin X (1 - Payout Ratio)
ROE
Leverage
Forecasting RE Formula
Classic RE Formula
5. Garbage in - garbage out. A characteristic of financial forecasting - i.e. if our assumptions are dumb - our answers will also be dumb
DFN Formula
GIGO
4 Ways to Decrease the DFN
Net Margin
6. Forecasting - future
Objective of Financial Forecasting
Definition of pro-forma
Spontaneous Accounts
Total Financing Need
7. Interest (assumed no change) -Retained Earnings (must be independently forecasted)
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8. NI / Sales
Leverage
Net Margin
Classic RE Formula
What accounts don't necessarily fall under either spontaneous or non-spontaneous?
9. Net Income / Equity OR Net Margin/profitability Asset Turnover/Efficiency Leverage/financing
Total Financing Need
Asset Turnover
Classic RE Formula
ROE
10. To understand the possible implications of today's decisions on tomorrow's performance
Non-spontaneous Accounts
Plowback Ratio
Sustainable Growth Rate Equation
Objective of Financial Forecasting
11. AKA Discretionary Accounts. Line-item accounts that do not automatically change as sales increase; these include: Notes Payable -Long-term liability -Common stock
DuPont Equation for ROE
Percent of Sales Method
DFN Formula
Non-spontaneous Accounts
12. Discretionary Financing Need; the amount of additional financing the firm will need to work the assumptions and pro forma financial statements.
DFN
Net Margin
DuPont Equation for ROE
Percent of Sales Method
13. Sales / Assets (As this goes up - more sales are generated per dollar of assets and the firm requires less investment to increase sales)
Asset Turnover
Classic RE Formula
DuPont Equation for ROE
Plowback Ratio
14. 1) Slow sales growth (e.g. increase price - net margin; decrease assets needed) 2) Examine capacity restraints (e.g. full capacity? outsource?) 3) Lower dividend payout (ratio) 4) Higher net margin (raise price - cut costs)
What accounts don't necessarily fall under either spontaneous or non-spontaneous?
DFN Formula
4 Ways to Decrease the DFN
Objective of Financial Forecasting
15. Total Assets needed to finance the new sales level
Classic RE Formula
Payout Ratio
ROE
Total Financing Need
16. Line-item accounts that change automatically as sales increase. These include: Most current assets -Accounts payable -Accruals (e.g. accrued wages) -SOMETIMES fixed assets
GIGO
Spontaneous Accounts
Asset Turnover
DFN
17. Cash Dividends / NI (Informs us how much of net income we pay out in dividends; its flipside is the plowback ratio)
Payout Ratio
Definition of pro-forma
Asset Turnover
DuPont Equation for ROE
18. Assets / Equity (When company is willing to borrow more and increase leverage - it has more cash to support growth)
Leverage
What accounts don't necessarily fall under either spontaneous or non-spontaneous?
Definition of pro-forma
Net Margin
19. ROE = Net Margin Asset Turnover Equity Multiplier 1) Net Margin = NI / Sales 2) Asset Turnover = Sales / Asset 3) Equity Multiplier = Assets / Equity
Objective of Financial Forecasting
DFN
DuPont Equation for ROE
Classic RE Formula
20. Method of forecasting that relates everything back to sales
Percent of Sales Method
Leverage
GIGO
Non-spontaneous Accounts
21. The rate of growth where the firm's big four $$ ratios (DuPont ratios and Payout) remain constant and no equity is required to fund growth. - G* = ROE (1-B) ROE = Net Margin Asset Turnover Leverage B = Payout Ratio 1-B = Plowback Ratio (G* is a fun
Sustainable Growth Rate Equation
ROE
Objective of Financial Forecasting
Total Financing Need