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

2. What does it mean when liability and equity are greater than assets?
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
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

3. Second Pass Pro Forma
1. Reduce payout ratio 2. External financing
Pro Forma that includes The Plug
Retention rate - net income retained after tax
Financial Modeling

4. The plug
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
Usage Variance
Sale Volume 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

5. Plow back ratio
Retention rate - net income retained after tax
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
Variable Cost Variance

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

7. Percentage of sales method
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
Retention rate - net income retained after tax
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

8. Sustainable growth rate - what must a firm do to grow faster?
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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
Financial Modeling

9. What are is the tool used for Financial Planning?
Financial Modeling
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
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

10. Internal Growth Rate - what must a firm do to grow faster?
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
Variable Cost Variance
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

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

12. What is assumed in the sustainable growth rate?
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
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

13. SVABB
Sale Volume Variance
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
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

14. What is the goal of financial managers?

15. SPABA
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
Sales Price Variance
1. Reduce payout 2. Issue new debt 3. Raise new equity
When it is a good time to expand or delay expansion

16. Sustainable growth rate
Pro Forma that includes The Plug
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
Variable Cost Variance

17. Net new financing
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Retention rate - net income retained after tax
Sale Volume Variance
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. In financial Planning - what do we forecast?
Retention rate - net income retained after tax
1. Financial statements 2. Cash flows
It means that the firm has generated more cash than what they planned to consume
Variable Cost Variance

19. UBAB
Usage Variance
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
Financial Modeling

20. Internal growth rate

21. VCBAA
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. 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
Maximize the value of stockholders' stake

22. 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
1. Reduce payout 2. Issue new debt 3. Raise new equity
Sales Price Variance
When it is a good time to expand or delay expansion