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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. What is the goal of financial managers?

2. UBAB
Sales Price Variance
Usage Variance
Variable Cost Variance
1. Reduce payout ratio 2. External financing

3. What is optimal Timing and Delay Option?
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
Financial Modeling
1. Reduce payout ratio 2. External financing

4. Plow back ratio
Retention rate - net income retained after tax
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 new new financing that needs to be added to the liabilities and equity side of the pro forma balance sheet to make it balance

5. What does it mean when liability and equity are greater than assets?
It means that the firm has generated more cash than what they planned to consume
1. Reduce payout 2. Issue new debt 3. Raise new equity
Usage Variance
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

6. In financial Planning - what do we forecast?
1. Financial statements 2. Cash flows
Sales Price Variance
Variable Cost Variance
Usage Variance

7. The plug
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. The maximum growth the firm can sustain without external financing 2. it is the growth the firm can support by reinvesting it's earnings
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales

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

9. Internal growth rate

10. Percentage of sales method
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
1. Reduce payout ratio 2. External financing
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

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

12. SPABA
It means that the firm has generated more cash than what they planned to consume
When it is a good time to expand or delay expansion
Variable Cost Variance
Sales Price Variance

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

14. What are is the tool used for Financial Planning?
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
Sale Volume Variance
Financial Modeling

15. Net new financing
Reduced
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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

16. 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
Variable Cost Variance
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.

17. If a firm pays dividends - what happens to its Internal Growth Rate?
Reduced
Sales Price 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
1. Reduce payout 2. Issue new debt 3. Raise new equity

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

19. What is assumed in the sustainable growth rate?
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
1. Reduce payout ratio 2. External financing
1. Reduce payout 2. Issue new debt 3. Raise new equity

20. Second Pass Pro Forma
Pro Forma that includes The Plug
When it is a good time to expand or delay expansion
Sales Price Variance
Usage Variance

21. SVABB
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
It means that the firm has generated more cash than what they planned to consume
Sale Volume Variance

22. Sustainable growth rate - what must a firm do to grow faster?
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
1. Reduce payout 2. Issue new debt 3. Raise new equity
1. Reduce payout ratio 2. External financing
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