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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. The plug
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. Financial statements 2. Cash flows
Reduced
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

2. Sustainable growth rate
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.

3. Percentage of sales method
Usage Variance
1. Reduce payout 2. Issue new debt 3. Raise new 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
Pro Forma that includes The Plug

4. In financial Planning - what do we forecast?
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
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

5. VCBAA
Retention rate - net income retained after tax
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 additional external financing a firm needs to secure to pay for the planned increase of assets

6. UBAB
Usage Variance
1. Financial statements 2. Cash flows
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

7. If a firm pays dividends - what happens to its Internal Growth Rate?
Reduced
Retention rate - net income retained after tax
Sales Price 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

8. Net new 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
Maximize the value of stockholders' stake
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. What are is the tool used for Financial Planning?
1. Reduce payout ratio 2. External financing
It means that the firm has generated more cash than what they planned to consume
Financial Modeling
Variable Cost Variance

10. Internal growth rate

11. SVABB
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
Usage Variance
Sale Volume Variance

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

13. What is the goal of financial managers?

14. Plow back ratio
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
Maximize the value of stockholders' stake
Variable Cost Variance

15. Second Pass Pro Forma
Reduced
Retention rate - net income retained after tax
Pro Forma that includes The Plug
Maximize the value of stockholders' stake

16. SPABA
Sales Price Variance
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
Usage Variance

17. What is assumed in the sustainable growth rate?
1. Reduce payout 2. Issue new debt 3. Raise new equity
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
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets

18. 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. Financial statements 2. Cash flows
Financial Modeling
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.

19. What is optimal Timing and Delay Option?
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
When it is a good time to expand or delay expansion
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. Sustainable growth rate - what must a firm do to grow faster?
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. 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 2. Issue new debt 3. Raise new equity

21. Internal Growth Rate - what must a firm do to grow faster?
Reduced
Financial Modeling
Maximize the value of stockholders' stake
1. Reduce payout ratio 2. External financing

22. 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 maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Retention rate - net income retained after tax
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