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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. Net new financing
Usage Variance
Variable Cost Variance
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

2. Second Pass Pro Forma
Variable Cost Variance
Pro Forma that includes The Plug
Usage 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

3. What does it mean when liability and equity are greater than assets?
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Financial Modeling
It means that the firm has generated more cash than what they planned to consume

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

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

6. 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
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 ratio 2. External financing
Sale Volume Variance

7. What is the goal of financial managers?

8. Sustainable growth rate
Variable Cost Variance
1. Reduce payout ratio 2. External financing
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.

9. What are is the tool used for Financial Planning?
When it is a good time to expand or delay expansion
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
1. Financial statements 2. Cash flows

10. VCBAA
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
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Variable Cost Variance

11. Internal growth rate

12. 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
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets

13. Plow back ratio
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
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
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

14. If a firm pays dividends - what happens to its Internal Growth Rate?
Usage Variance
When it is a good time to expand or delay expansion
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Reduced

15. What is optimal Timing and Delay Option?
Usage Variance
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
When it is a good time to expand or delay expansion
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

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

17. UBAB
Retention rate - net income retained after tax
Usage 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. Financial statements 2. Cash flows

18. Sustainable growth rate - what must a firm do to grow faster?
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
Financial Modeling
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

19. In financial Planning - what do we forecast?
1. Financial statements 2. Cash flows
Pro Forma that includes The Plug
Sale Volume Variance
Variable Cost Variance

20. What is assumed in the sustainable growth rate?
Maximize the value of stockholders' stake
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
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
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

21. Internal Growth Rate - what must a firm do to grow faster?
Maximize the value of stockholders' stake
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. 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

22. Percentage of sales method
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
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
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