Test your basic knowledge |

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. UBAB
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
Sales Price Variance
Usage Variance

2. Plow back ratio
Sales Price Variance
Retention rate - net income retained after tax
Sale Volume Variance
1. Reduce payout ratio 2. External financing

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

4. What does it mean when liability and equity are greater than assets?
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
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
It means that the firm has generated more cash than what they planned to consume

5. Internal Growth Rate - what must a firm do to grow faster?
Variable Cost Variance
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
Usage Variance

6. The plug
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
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

7. Net new financing
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Sale Volume Variance
Usage Variance
Retention rate - net income retained after tax

8. Second Pass Pro Forma
Pro Forma that includes The Plug
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.
Usage Variance

9. SPABA
Sales Price Variance
Financial Modeling
Pro Forma that includes The Plug
1. Financial statements 2. Cash flows

10. What is assumed in the sustainable growth rate?
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. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
Sales Price Variance

11. In financial Planning - what do we forecast?
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
Retention rate - net income retained after tax
Reduced

12. SVABB
Maximize the value of stockholders' stake
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
Sale Volume Variance
Usage Variance

13. What is optimal Timing and Delay Option?
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
When it is a good time to expand or delay expansion
1. Financial statements 2. Cash flows

14. Sustainable growth rate - what must a firm do to grow faster?
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
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 maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.

15. If a firm pays dividends - what happens to its Internal Growth Rate?
Reduced
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
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

16. What does it mean when assets are greater than liability and equity?
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
Reduced
Variable Cost Variance

17. Sustainable growth rate
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
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity 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

18. What is the goal of financial managers?

19. Percentage of sales method
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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 maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

20. Internal growth rate

21. VCBAA
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.
Variable Cost 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

22. What are is the tool used for Financial Planning?
Financial Modeling
1. Reduce payout ratio 2. External financing
Usage Variance
Sales Price Variance