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 is optimal Timing and Delay Option?
Financial Modeling
When it is a good time to expand or delay expansion
1. Financial statements 2. Cash flows
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

2. SPABA
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
When it is a good time to expand or delay expansion
Financial Modeling
Sales Price Variance

3. Second Pass Pro Forma
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
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

4. What is assumed in the sustainable growth rate?
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
1. Financial statements 2. Cash flows

5. VCBAA
Variable Cost Variance
Maximize the value of stockholders' stake
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. The maximum growth the firm can sustain without external financing 2. it is the growth the firm can support by reinvesting it's earnings

6. Internal growth rate

7. Internal 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
Sales Price Variance
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

8. Sustainable growth rate
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Retention rate - net income retained after tax
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

9. SVABB
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Financial Modeling
Sale Volume Variance
Maximize the value of stockholders' stake

10. UBAB
Pro Forma that includes The Plug
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Usage Variance
Reduced

11. What is the goal of financial managers?

12. The plug
Retention rate - net income retained after tax
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
When it is a good time to expand or delay expansion

13. Net new financing
1. Reduce payout ratio 2. External financing
Sales Price Variance
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
When it is a good time to expand or delay expansion

14. If a firm pays dividends - what happens to its Internal Growth Rate?
Retention rate - net income retained after tax
Reduced
1. Reduce payout 2. Issue new debt 3. Raise new equity
Variable Cost Variance

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

16. What does it mean when liability and equity are greater than assets?
Financial Modeling
It means that the firm has generated more cash than what they planned to consume
1. Financial statements 2. Cash flows
1. Reduce payout ratio 2. External financing

17. Plow back ratio
When it is a good time to expand or delay expansion
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
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

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

19. What does it mean when assets are greater than liability and equity?
Maximize the value of stockholders' stake
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Pro Forma that includes The Plug
1. Reduce payout ratio 2. External financing

20. Sustainable growth rate - what must a firm do to grow faster?
Sales Price 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.
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets

21. In financial Planning - what do we forecast?
Reduced
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
1. Financial statements 2. Cash flows

22. What are is the tool used for Financial Planning?
It means that the firm has generated more cash than what they planned to consume
Financial Modeling
1. Reduce payout 2. Issue new debt 3. Raise new equity
When it is a good time to expand or delay expansion