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

2. What are is the tool used for Financial Planning?
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
It means that the firm has generated more cash than what they planned to consume
Financial Modeling

3. Sustainable growth rate
Pro Forma that includes The Plug
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.
1. Financial statements 2. Cash flows

4. Net new financing
Variable Cost Variance
It means that the firm has generated more cash than what they planned to consume
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

5. What is the goal of financial managers?

6. Percentage of sales method
Variable Cost Variance
Maximize the value of stockholders' stake
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

7. Plow back ratio
Financial Modeling
Retention rate - net income retained after tax
1. Financial statements 2. Cash flows
Variable Cost Variance

8. Second Pass Pro Forma
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
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.
Pro Forma that includes The Plug

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

10. The plug
It means that the firm has generated more cash than what they planned to consume
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. Reduce payout ratio 2. External financing
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

11. In financial Planning - what do we forecast?
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
1. Reduce payout ratio 2. External financing
It means that the firm has generated more cash than what they planned to consume

12. SPABA
Sales Price 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
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 additional external financing a firm needs to secure to pay for the planned increase of assets

13. SVABB
Maximize the value of stockholders' stake
Sale Volume 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

14. Internal Growth Rate - what must a firm do to grow faster?
Retention rate - net income retained after tax
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
Pro Forma that includes The Plug
1. Reduce payout ratio 2. External financing

15. Internal growth rate

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

17. What is assumed in the sustainable 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
Maximize the value of stockholders' stake
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

18. If a firm pays dividends - what happens to its Internal Growth Rate?
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
Reduced
Maximize the value of stockholders' stake

19. What is optimal Timing and Delay Option?
Variable Cost Variance
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
When it is a good time to expand or delay expansion

20. What does it mean when liability and equity are greater than assets?
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
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
Financial Modeling

21. Sustainable growth rate - what must a firm do to grow faster?
1. Reduce payout 2. Issue new debt 3. Raise new equity
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
Retention rate - net income retained after tax
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

22. VCBAA
1. Reduce payout ratio 2. External financing
It means that the firm has generated more cash than what they planned to consume
Variable Cost Variance
New financing is needed - the firm must borrow or issue new equity to fund the shortfall