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Financial Forecasting

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. Garbage in - garbage out. A characteristic of financial forecasting - i.e. if our assumptions are dumb - our answers will also be dumb






2. = 1 - (B - Payout Ratio) (This is the flipside of the payout ratio)






3. Method of forecasting that relates everything back to sales






4. Total Assets needed to finance the new sales level






5. To understand the possible implications of today's decisions on tomorrow's performance






6. NI / Sales






7. Future RE = Old RE + Projected Sales X Net Margin X (1 - Payout Ratio)






8. AKA Discretionary Accounts. Line-item accounts that do not automatically change as sales increase; these include: Notes Payable -Long-term liability -Common stock






9. Assets / Equity (When company is willing to borrow more and increase leverage - it has more cash to support growth)






10. Discretionary Financing Need; the amount of additional financing the firm will need to work the assumptions and pro forma financial statements.






11. 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






12. Line-item accounts that change automatically as sales increase. These include: Most current assets -Accounts payable -Accruals (e.g. accrued wages) -SOMETIMES fixed assets






13. Cash Dividends / NI (Informs us how much of net income we pay out in dividends; its flipside is the plowback ratio)






14. Net Income / Equity OR Net Margin/profitability Asset Turnover/Efficiency Leverage/financing






15. Interest (assumed no change) -Retained Earnings (must be independently forecasted)

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16. Forecasting - future






17. Projected Total Assets - Projected Total Liabilities - Projected Owner's Equity






18. ROE = Net Margin Asset Turnover Equity Multiplier 1) Net Margin = NI / Sales 2) Asset Turnover = Sales / Asset 3) Equity Multiplier = Assets / Equity






19. 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)






20. RE = Old RE + Change in RE (NI - Dividends)






21. Sales / Assets (As this goes up - more sales are generated per dollar of assets and the firm requires less investment to increase sales)







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Can you answer 50 questions in 15 minutes?


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