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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. SPABA
1. Reduce payout 2. Issue new debt 3. Raise new equity
Retention rate - net income retained after tax
Maximize the value of stockholders' stake
Sales Price Variance

2. What are is the tool used for Financial Planning?
It means that the firm has generated more cash than what they planned to consume
Financial Modeling
Usage Variance
1. Reduce payout ratio 2. External financing

3. Sustainable growth rate - what must a firm do to grow faster?
When it is a good time to expand or delay expansion
1. Reduce payout 2. Issue new debt 3. Raise new equity
1. Financial statements 2. Cash flows
Maximize the value of stockholders' stake

4. Percentage of sales method
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
Sales Price Variance
Maximize the value of stockholders' stake
Financial Modeling

5. Plow back ratio
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 additional external financing a firm needs to secure to pay for the planned increase of assets
Retention rate - net income retained after tax
Sales Price Variance

6. Internal Growth Rate - what must a firm do to grow faster?
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
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
1. Reduce payout ratio 2. External financing
1. Reduce payout 2. Issue new debt 3. Raise new equity

7. What does it mean when assets are greater than liability and equity?
Variable Cost Variance
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
Sale Volume Variance
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

8. What is assumed in the sustainable growth rate?
It means that the firm has generated more cash than what they planned to consume
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
Reduced
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

9. Internal growth rate

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

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11. Second Pass Pro Forma
Usage Variance
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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
Pro Forma that includes The Plug

12. What is the goal of financial managers?

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13. UBAB
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
Usage Variance
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
When it is a good time to expand or delay expansion

14. In financial Planning - what do we forecast?
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Usage Variance
Financial Modeling
1. Financial statements 2. Cash flows

15. Sustainable growth rate
Sale Volume Variance
1. Reduce payout 2. Issue new debt 3. Raise new equity
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Retention rate - net income retained after tax

16. What is optimal Timing and Delay Option?
Retention rate - net income retained after tax
Financial Modeling
When it is a good time to expand or delay expansion
Sale Volume Variance

17. SVABB
Maximize the value of stockholders' stake
Sale Volume Variance
When it is a good time to expand or delay expansion
Sales Price Variance

18. The plug
Maximize the value of stockholders' stake
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
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

19. Net new financing
Variable Cost Variance
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Financial Modeling
Usage Variance

20. If a firm pays dividends - what happens to its Internal Growth Rate?
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
Reduced
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
Sales Price Variance

21. What does it mean when liability and equity are greater than assets?
Reduced
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
It means that the firm has generated more cash than what they planned to consume

22. VCBAA
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
Variable Cost Variance
Financial Modeling
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets