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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. Internal Growth Rate - what must a firm do to grow faster?
When it is a good time to expand or delay expansion
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
1. Reduce payout ratio 2. External financing

2. Second Pass Pro Forma
Sales Price Variance
Pro Forma that includes The Plug
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
Financial Modeling

3. 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
Financial Modeling
Variable Cost Variance
Retention rate - net income retained after tax

4. 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
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

5. Internal growth rate

6. What are is the tool used for Financial Planning?
Sale Volume Variance
Financial Modeling
1. Reduce payout 2. Issue new debt 3. Raise new equity
It means that the firm has generated more cash than what they planned to consume

7. 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
When it is a good time to expand or delay expansion
Variable Cost Variance
Usage Variance

8. If a firm pays dividends - what happens to its Internal Growth Rate?
1. Reduce payout ratio 2. External financing
Variable Cost Variance
Reduced
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

9. Sustainable growth rate
1. Reduce payout 2. Issue new debt 3. Raise new equity
Variable Cost Variance
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Reduced

10. What is assumed in the sustainable growth rate?
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
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
Retention rate - net income retained after tax

11. SVABB
Sales Price Variance
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Reduced
Sale Volume Variance

12. SPABA
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
Financial Modeling
Sales Price Variance
1. Reduce payout 2. Issue new debt 3. Raise new equity

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

14. What does it mean when assets are greater than liability and equity?
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Sales Price Variance
Reduced

15. Plow back ratio
Reduced
Retention rate - net income retained after tax
It means that the firm has generated more cash than what they planned to consume
Financial Modeling

16. The plug
Sale Volume 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. The maximum growth the firm can sustain without external financing 2. it is the growth the firm can support by reinvesting it's earnings

17. What is the goal of financial managers?

18. Net new financing
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
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
Retention rate - net income retained after tax
1. Reduce payout ratio 2. External financing

19. What is optimal Timing and Delay Option?
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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.
1. Financial statements 2. Cash flows

20. Sustainable growth rate - what must a firm do to grow faster?
1. Reduce payout 2. Issue new debt 3. Raise new 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
It means that the firm has generated more cash than what they planned to consume

21. In financial Planning - what do we forecast?
Retention rate - net income retained after tax
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
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. Financial statements 2. Cash flows

22. VCBAA
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
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
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