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