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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. Net new 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
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Financial Modeling
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets

2. Second Pass Pro Forma
Reduced
Usage Variance
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

3. Internal growth rate

4. The plug
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
When it is a good time to expand or delay expansion
1. Financial statements 2. Cash flows

5. SVABB
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
Financial Modeling
Sale Volume Variance

6. Sustainable growth rate
Sale Volume Variance
1. Financial statements 2. Cash flows
When it is a good time to expand or delay expansion
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.

7. What is optimal Timing and Delay Option?
When it is a good time to expand or delay expansion
Sale Volume Variance
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
1. Reduce payout 2. Issue new debt 3. Raise new equity

8. What is the goal of financial managers?

9. In financial Planning - what do we forecast?
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
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
1. Financial statements 2. Cash flows

10. What are is the tool used for Financial Planning?
Usage 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
1. Financial statements 2. Cash flows
Financial Modeling

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

12. What is assumed in the sustainable growth rate?
When it is a good time to expand or delay expansion
Sale Volume Variance
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

13. SPABA
Variable Cost Variance
Sales Price Variance
It means that the firm has generated more cash than what they planned to consume
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

14. Internal Growth Rate - what must a firm do to grow faster?
Reduced
Retention rate - net income retained after tax
1. Reduce payout ratio 2. External financing
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales

15. What does it mean when assets are greater than liability and equity?
Maximize the value of stockholders' stake
1. Financial statements 2. Cash flows
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Reduced

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

17. What does it mean when liability and equity are greater than assets?
1. Financial statements 2. Cash flows
It means that the firm has generated more cash than what they planned to consume
Financial Modeling
Sale Volume Variance

18. UBAB
Variable Cost Variance
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
Usage Variance

19. Plow back ratio
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
Variable Cost Variance
Retention rate - net income retained after tax
When it is a good time to expand or delay expansion

20. Percentage of sales method
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
1. Financial statements 2. Cash flows
Reduced
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales

21. If a firm pays dividends - what happens to its Internal Growth Rate?
Reduced
1. Financial statements 2. Cash flows
Financial Modeling
When it is a good time to expand or delay expansion

22. VCBAA
Variable Cost Variance
Sales Price Variance
It means that the firm has generated more cash than what they planned to consume
Pro Forma that includes The Plug