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Financial Modeling And Proforma Analysis

Instructions:

Answer 22 questions in 15 minutes.
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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 optimal Timing and Delay Option?
Financial Modeling
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

2. What is assumed in the sustainable growth rate?
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
1. Financial statements 2. Cash flows
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

3. Internal growth rate

4. What is the goal of financial managers?

5. 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
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
1. Reduce payout 2. Issue new debt 3. Raise new equity

6. What are is the tool used for Financial Planning?
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
Financial Modeling
Usage Variance

7. What does it mean when liability and equity are greater than assets?
1. Reduce payout ratio 2. External financing
It means that the firm has generated more cash than what they planned to consume
Financial Modeling
1. Reduce payout 2. Issue new debt 3. Raise new equity

8. Net new financing
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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
Pro Forma that includes The Plug

9. 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
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
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
Maximize the value of stockholders' stake

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

11. Percentage of sales method
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
It means that the firm has generated more cash than what they planned to consume
Maximize the value of stockholders' stake

12. What does it mean when assets are greater than liability and equity?
1. Financial statements 2. Cash flows
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales

13. Sustainable growth rate
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.
Pro Forma that includes The Plug
When it is a good time to expand or delay expansion

14. Plow back ratio
1. Reduce payout ratio 2. External financing
When it is a good time to expand or delay expansion
Pro Forma that includes The Plug
Retention rate - net income retained after tax

15. 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
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.

16. Second Pass Pro Forma
Pro Forma that includes 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
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

17. If a firm pays dividends - what happens to its Internal Growth Rate?
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
Reduced
1. Reduce payout 2. Issue new debt 3. Raise new equity
Sale Volume Variance

18. In financial Planning - what do we forecast?
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
Variable Cost 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

19. SPABA
Reduced
Sales Price Variance
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
1. Financial statements 2. Cash flows

20. Internal Growth Rate - what must a firm do to grow faster?
Financial Modeling
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Maximize the value of stockholders' stake
1. Reduce payout ratio 2. External financing

21. UBAB
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Variable Cost Variance
Usage Variance

22. VCBAA
Reduced
Maximize the value of stockholders' stake
Pro Forma that includes The Plug
Variable Cost Variance