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 liability and equity are greater than assets?
1. Reduce payout 2. Issue new debt 3. Raise new equity
Reduced
It means that the firm has generated more cash than what they planned to consume
When it is a good time to expand or delay expansion

2. Sustainable growth rate
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
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
1. Reduce payout ratio 2. External financing

3. Second Pass Pro Forma
1. Reduce payout ratio 2. External financing
Pro Forma that includes The Plug
1. Reduce payout 2. Issue new debt 3. Raise new equity
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.

4. What does it mean when assets are greater than liability and equity?
Sale Volume Variance
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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

5. In financial Planning - what do we forecast?
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 2. Issue new debt 3. Raise new equity
1. Financial statements 2. Cash flows

6. Plow back ratio
When it is a good time to expand or delay expansion
Retention rate - net income retained after tax
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

7. Internal growth rate

8. Internal Growth Rate - what must a firm do to grow faster?
Reduced
Pro Forma that includes The Plug
1. Reduce payout ratio 2. External financing
Variable Cost Variance

9. VCBAA
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
When it is a good time to expand or delay expansion
1. Reduce payout 2. Issue new debt 3. Raise new equity

10. What is assumed in the sustainable growth rate?
Retention rate - net income retained after tax
Reduced
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

11. What is the goal of financial managers?

12. SPABA
When it is a good time to expand or delay expansion
Maximize the value of stockholders' stake
Sale Volume Variance
Sales Price Variance

13. UBAB
Usage Variance
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
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

14. What is optimal Timing and Delay Option?
Sale Volume Variance
1. Reduce payout ratio 2. External financing
When it is a good time to expand or delay expansion
Reduced

15. 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
Pro Forma that includes The Plug
Financial Modeling

16. Sustainable growth rate - what must a firm do to grow faster?
It means that the firm has generated more cash than what they planned to consume
Sale Volume Variance
1. Reduce payout 2. Issue new debt 3. Raise new equity
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.

17. Net new financing
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
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
1. Reduce payout 2. Issue new debt 3. Raise new equity

18. SVABB
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Reduced
Sale Volume Variance
Variable Cost Variance

19. What are is the tool used for Financial Planning?
Usage Variance
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
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales

20. If a firm pays dividends - what happens to its Internal Growth Rate?
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
Reduced
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

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

22. Percentage of sales method
Sales Price 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
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
It means that the firm has generated more cash than what they planned to consume