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
It means that the firm has generated more cash than what they planned to consume
Usage Variance
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.

2. What is optimal Timing and Delay Option?
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 2. Issue new debt 3. Raise new equity
When it is a good time to expand or delay expansion
Variable Cost Variance

3. Plow back ratio
Retention rate - net income retained after tax
Sales Price Variance
It means that the firm has generated more cash than what they planned to consume
Sale Volume Variance

4. Percentage of sales method
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
1. Reduce payout 2. Issue new debt 3. Raise new equity
Maximize the value of stockholders' stake

5. SPABA
Sales Price Variance
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
Retention rate - net income retained after tax

6. What is the goal of financial managers?

7. Second Pass Pro Forma
Usage Variance
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. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

8. 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
Financial Modeling
Pro Forma that includes The Plug
Usage Variance

9. 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
Reduced
Pro Forma that includes The Plug
Sales Price Variance

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

11. Net new financing
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
1. Financial statements 2. Cash flows
Variable Cost Variance

12. 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
Reduced
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Sales Price Variance

13. Sustainable growth rate
Sale Volume Variance
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity 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
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

14. Internal growth rate

15. VCBAA
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Maximize the value of stockholders' stake
Variable Cost Variance

16. What is assumed in the sustainable growth rate?
1. Reduce payout ratio 2. External financing
Sale Volume Variance
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
When it is a good time to expand or delay expansion

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

18. In financial Planning - what do we forecast?
When it is a good time to expand or delay expansion
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
Sales Price Variance

19. What are is the tool used for Financial Planning?
Sale Volume Variance
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Financial Modeling
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.

20. Sustainable growth rate - what must a firm do to grow faster?
Maximize the value of stockholders' stake
1. Reduce payout 2. Issue new debt 3. Raise new equity
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

21. If a firm pays dividends - what happens to its Internal Growth Rate?
Reduced
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. Financial statements 2. Cash flows
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

22. Internal Growth Rate - what must a firm do to grow faster?
1. Reduce payout ratio 2. External financing
Sales Price Variance
Maximize the value of stockholders' stake
Pro Forma that includes The Plug