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?
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
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Pro Forma that includes The Plug

2. 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
Sales Price Variance
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

3. UBAB
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Usage Variance
1. Financial statements 2. Cash flows
Sales Price Variance

4. Internal growth rate

5. VCBAA
Reduced
It means that the firm has generated more cash than what they planned to consume
Variable Cost Variance
1. Reduce payout ratio 2. External financing

6. SVABB
Usage Variance
Sales Price Variance
Sale Volume Variance
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

7. Internal Growth Rate - what must a firm do to grow faster?
1. Reduce payout ratio 2. External financing
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
Maximize the value of stockholders' stake

8. SPABA
Maximize the value of stockholders' stake
1. Reduce payout ratio 2. External financing
When it is a good time to expand or delay expansion
Sales Price Variance

9. Sustainable growth rate - what must a firm do to grow faster?
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Financial Modeling
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 2. Issue new debt 3. Raise new equity

10. Second Pass Pro Forma
Retention rate - net income retained after tax
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
Pro Forma that includes The Plug

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

12. What is the goal of financial managers?

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

14. 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
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
Usage Variance
Pro Forma that includes The Plug

15. What are is the tool used for Financial Planning?
Financial Modeling
Reduced
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

16. If a firm pays dividends - what happens to its Internal Growth Rate?
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
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
Reduced
Sale Volume Variance

17. In financial Planning - what do we forecast?
1. Financial statements 2. Cash flows
Sale Volume Variance
Usage 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

18. Sustainable growth rate
Variable Cost Variance
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Reduced

19. What does it mean when assets are greater than liability and equity?
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Reduced
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

20. What is optimal Timing and Delay Option?
It means that the firm has generated more cash than what they planned to consume
Maximize the value of stockholders' stake
When it is a good time to expand or delay expansion
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

21. Plow back ratio
Pro Forma that includes The Plug
When it is a good time to expand or delay expansion
Retention rate - net income retained after tax
Financial Modeling

22. Net new financing
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
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