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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. Sustainable growth rate - what must a firm do to grow faster?
1. Reduce payout 2. Issue new debt 3. Raise new equity
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
Variable Cost Variance
Sales Price Variance

2. VCBAA
1. Financial statements 2. Cash flows
Variable Cost Variance
1. Reduce payout ratio 2. External financing
Reduced

3. What is optimal Timing and Delay Option?
When it is a good time to expand or delay expansion
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
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

4. Sustainable growth rate
Variable Cost Variance
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Sale Volume 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

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

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6. Plow back ratio
Financial Modeling
1. Reduce payout ratio 2. External financing
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
Retention rate - net income retained after tax

7. SVABB
1. Financial statements 2. Cash flows
Financial Modeling
Sale Volume Variance
It means that the firm has generated more cash than what they planned to consume

8. Internal Growth Rate - what must a firm do to grow faster?
1. Reduce payout ratio 2. External financing
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
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets

9. SPABA
Sales Price Variance
1. Reduce payout ratio 2. External financing
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

10. What are is the tool used for Financial Planning?
Financial Modeling
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
It means that the firm has generated more cash than what they planned to consume

11. What is the goal of financial managers?

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12. If a firm pays dividends - what happens to its Internal Growth Rate?
Sale Volume Variance
Reduced
Variable Cost Variance
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

13. What does it mean when assets are greater than liability and equity?
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
Maximize the value of stockholders' stake
Sale Volume Variance

14. Percentage of sales method
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
1. Financial statements 2. Cash flows
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

15. Internal growth rate

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16. UBAB
It means that the firm has generated more cash than what they planned to consume
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
Usage Variance

17. Second Pass Pro Forma
Pro Forma that includes The Plug
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
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

18. In financial Planning - what do we forecast?
Financial Modeling
Variable Cost Variance
Retention rate - net income retained after tax
1. Financial statements 2. Cash flows

19. What is assumed in the sustainable growth rate?
Pro Forma that includes The Plug
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
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

20. The plug
Variable Cost Variance
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
Reduced
1. Reduce payout ratio 2. External financing

21. What does it mean when liability and equity are greater than assets?
When it is a good time to expand or delay expansion
Retention rate - net income retained after tax
It means that the firm has generated more cash than what they planned to consume
Financial Modeling

22. Net new financing
Maximize the value of stockholders' stake
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
Reduced