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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. Internal growth rate

2. What does it mean when assets are greater than liability and equity?
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
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Retention rate - net income retained after tax

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

4. Second Pass Pro Forma
Sale Volume Variance
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
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. SVABB
Sale Volume 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
Variable Cost Variance
Retention rate - net income retained after tax

6. SPABA
Maximize the value of stockholders' stake
1. Reduce payout 2. Issue new debt 3. Raise new equity
Sale Volume Variance
Sales Price Variance

7. What is assumed in the sustainable growth rate?
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
Reduced
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

8. The plug
Maximize the value of stockholders' stake
Retention rate - net income retained after tax
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

9. Internal Growth Rate - what must a firm do to grow faster?
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. Reduce payout ratio 2. External financing
Pro Forma that includes The Plug
It means that the firm has generated more cash than what they planned to consume

10. Plow back ratio
1. Financial statements 2. Cash flows
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.
Pro Forma that includes The Plug

11. Sustainable growth rate
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Financial Modeling
1. Financial statements 2. Cash flows

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

13. UBAB
1. Reduce payout 2. Issue new debt 3. Raise new equity
1. Reduce payout ratio 2. External financing
Usage 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

14. VCBAA
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
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

15. Sustainable growth rate - what must a firm do to grow faster?
1. Reduce payout 2. Issue new debt 3. Raise new equity
Maximize the value of stockholders' stake
1. Financial statements 2. Cash flows
1. Reduce payout ratio 2. External financing

16. What is the goal of financial managers?

17. Net new financing
Variable Cost Variance
1. Financial statements 2. Cash flows
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

18. In financial Planning - what do we forecast?
Retention rate - net income retained after tax
1. Financial statements 2. Cash flows
Financial Modeling
Pro Forma that includes The Plug

19. 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
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Variable Cost Variance
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.

20. What is optimal Timing and Delay Option?
Reduced
Pro Forma that includes The Plug
When it is a good time to expand or delay expansion
It means that the firm has generated more cash than what they planned to consume

21. What does it mean when liability and equity are greater than assets?
Variable Cost Variance
Pro Forma that includes The Plug
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

22. What are is the tool used for Financial Planning?
Financial Modeling
Reduced
Sale Volume 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