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Financial Modeling And Proforma Analysis

Instructions:

Answer 22 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. If a firm pays dividends - what happens to its Internal Growth Rate?
Reduced
It means that the firm has generated more cash than what they planned to consume
Maximize the value of stockholders' stake
Useful in alerting you to need to plan for external financing - but - It cannot tell you your planned growth increases of decreased the firm's value

2. Net new financing
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets

3. Sustainable growth rate
Sales Price Variance
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Sale Volume Variance

4. VCBAA
Pro Forma that includes The Plug
Variable Cost Variance
Sale Volume Variance
1. Reduce payout ratio 2. External financing

5. What are is the tool used for Financial Planning?
1. The maximum growth the firm can sustain without external financing 2. it is the growth the firm can support by reinvesting it's earnings
1. Reduce payout ratio 2. External financing
Sales Price Variance
Financial Modeling

6. What does the internal and sustainable rate tell us?

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7. The plug
1. Reduce payout 2. Issue new debt 3. Raise new equity
Financial Modeling
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
The amount of new new financing that needs to be added to the liabilities and equity side of the pro forma balance sheet to make it balance

8. What does it mean when assets are greater than liability and equity?
It means that the firm has generated more cash than what they planned to consume
Retention rate - net income retained after tax
Usage Variance
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

9. What is the goal of financial managers?

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10. What is assumed in the sustainable growth rate?
Usage Variance
Sale Volume Variance
Maximize the value of stockholders' stake
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

11. Second Pass Pro Forma
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
Financial Modeling
Pro Forma that includes The Plug
When it is a good time to expand or delay expansion

12. SVABB
Sale Volume Variance
Usage Variance
Retention rate - net income retained after tax
Pro Forma that includes The Plug

13. Internal Growth Rate - what must a firm do to grow faster?
Financial Modeling
1. Reduce payout ratio 2. External financing
1. Reduce payout 2. Issue new debt 3. Raise new equity
Variable Cost Variance

14. Plow back ratio
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
Retention rate - net income retained after tax
The amount of new new financing that needs to be added to the liabilities and equity side of the pro forma balance sheet to make it balance
It means that the firm has generated more cash than what they planned to consume

15. Percentage of sales method
Retention rate - net income retained after tax
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
Maximize the value of stockholders' stake
Sale Volume Variance

16. SPABA
Sales Price Variance
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
Sale Volume Variance
1. Reduce payout ratio 2. External financing

17. UBAB
Usage Variance
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Reduced
Sales Price Variance

18. What does it mean when liability and equity are greater than assets?
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
It means that the firm has generated more cash than what they planned to consume
Sale Volume Variance
Sales Price Variance

19. What is optimal Timing and Delay Option?
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
It means that the firm has generated more cash than what they planned to consume
Pro Forma that includes The Plug
When it is a good time to expand or delay expansion

20. Sustainable growth rate - what must a firm do to grow faster?
Reduced
Useful in alerting you to need to plan for external financing - but - It cannot tell you your planned growth increases of decreased the firm's value
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
1. Reduce payout 2. Issue new debt 3. Raise new equity

21. In financial Planning - what do we forecast?
Financial Modeling
1. Financial statements 2. Cash flows
The amount of new new financing that needs to be added to the liabilities and equity side of the pro forma balance sheet to make it balance
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets

22. Internal growth rate

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