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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 liability and equity are greater than assets?
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.
It means that the firm has generated more cash than what they planned to consume
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets

2. 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
Usage Variance
Retention rate - net income retained after tax

3. UBAB
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
Usage 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.

4. Net new financing
Financial Modeling
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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

5. What is optimal Timing and Delay Option?
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
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

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

7. VCBAA
Financial Modeling
When it is a good time to expand or delay expansion
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

8. SPABA
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
Sales Price 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

9. 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
Maximize the value of stockholders' stake
Reduced
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets

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

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

12. In financial Planning - what do we forecast?
It means that the firm has generated more cash than what they planned to consume
1. Financial statements 2. Cash flows
When it is a good time to expand or delay expansion
Maximize the value of stockholders' stake

13. What is the goal of financial managers?

14. What are is the tool used for Financial Planning?
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
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

15. What is assumed in the sustainable growth rate?
Financial Modeling
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.
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

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

17. Internal growth rate

18. Second Pass Pro Forma
Sales Price Variance
Sale Volume 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
Pro Forma that includes The Plug

19. The plug
Sales Price 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
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 maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.

20. Sustainable growth rate
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
Retention rate - net income retained after tax

21. Sustainable growth rate - what must a firm do to grow faster?
1. Financial statements 2. Cash flows
1. Reduce payout 2. Issue new debt 3. Raise new equity
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
Sales Price Variance

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