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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. Discretionary Financing Need; the amount of additional financing the firm will need to work the assumptions and pro forma financial statements.
Definition of pro-forma
Spontaneous Accounts
DFN
ROE
2. Forecasting - future
GIGO
Net Margin
Forecasting RE Formula
Definition of pro-forma
3. 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)
Classic RE Formula
Net Margin
Plowback Ratio
4 Ways to Decrease the DFN
4. Line-item accounts that change automatically as sales increase. These include: Most current assets -Accounts payable -Accruals (e.g. accrued wages) -SOMETIMES fixed assets
Leverage
What accounts don't necessarily fall under either spontaneous or non-spontaneous?
Spontaneous Accounts
Forecasting RE Formula
5. Net Income / Equity OR Net Margin/profitability Asset Turnover/Efficiency Leverage/financing
Classic RE Formula
ROE
4 Ways to Decrease the DFN
Objective of Financial Forecasting
6. Method of forecasting that relates everything back to sales
Percent of Sales Method
ROE
GIGO
Plowback Ratio
7. Garbage in - garbage out. A characteristic of financial forecasting - i.e. if our assumptions are dumb - our answers will also be dumb
Leverage
Forecasting RE Formula
GIGO
Payout Ratio
8. To understand the possible implications of today's decisions on tomorrow's performance
Objective of Financial Forecasting
Sustainable Growth Rate Equation
Plowback Ratio
Definition of pro-forma
9. = 1 - (B - Payout Ratio) (This is the flipside of the payout ratio)
Percent of Sales Method
Plowback Ratio
Leverage
Spontaneous Accounts
10. Total Assets needed to finance the new sales level
ROE
DuPont Equation for ROE
What accounts don't necessarily fall under either spontaneous or non-spontaneous?
Total Financing Need
11. ROE = Net Margin Asset Turnover Equity Multiplier 1) Net Margin = NI / Sales 2) Asset Turnover = Sales / Asset 3) Equity Multiplier = Assets / Equity
4 Ways to Decrease the DFN
Plowback Ratio
Net Margin
DuPont Equation for ROE
12. NI / Sales
Payout Ratio
Net Margin
GIGO
Definition of pro-forma
13. Sales / Assets (As this goes up - more sales are generated per dollar of assets and the firm requires less investment to increase sales)
Classic RE Formula
Asset Turnover
DuPont Equation for ROE
GIGO
14. Projected Total Assets - Projected Total Liabilities - Projected Owner's Equity
DFN Formula
Forecasting RE Formula
GIGO
Plowback Ratio
15. Interest (assumed no change) -Retained Earnings (must be independently forecasted)
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16. Future RE = Old RE + Projected Sales X Net Margin X (1 - Payout Ratio)
Forecasting RE Formula
DFN Formula
Classic RE Formula
Leverage
17. Cash Dividends / NI (Informs us how much of net income we pay out in dividends; its flipside is the plowback ratio)
Percent of Sales Method
Payout Ratio
DFN Formula
4 Ways to Decrease the DFN
18. AKA Discretionary Accounts. Line-item accounts that do not automatically change as sales increase; these include: Notes Payable -Long-term liability -Common stock
Non-spontaneous Accounts
Classic RE Formula
Plowback Ratio
DFN
19. 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
Plowback Ratio
Payout Ratio
Spontaneous Accounts
20. RE = Old RE + Change in RE (NI - Dividends)
Classic RE Formula
Objective of Financial Forecasting
Spontaneous Accounts
Leverage
21. Assets / Equity (When company is willing to borrow more and increase leverage - it has more cash to support growth)
What accounts don't necessarily fall under either spontaneous or non-spontaneous?
Leverage
Spontaneous Accounts
ROE