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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 - what must a firm do to grow faster?
Maximize the value of stockholders' stake
1. Reduce payout ratio 2. External financing
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
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. What does it mean when assets are greater than liability and equity?
Usage Variance
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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.

3. Sustainable growth rate - what must a firm do to grow faster?
1. Reduce payout 2. Issue new debt 3. Raise new equity
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

4. Percentage of sales method
Retention rate - net income retained after tax
Financial Modeling
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. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

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

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6. The plug
Pro Forma that includes 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
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

7. Internal growth rate

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8. In financial Planning - what do we forecast?
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
1. Financial statements 2. Cash flows
It means that the firm has generated more cash than what they planned to consume

9. What is optimal Timing and Delay Option?
When it is a good time to expand or delay expansion
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
Financial Modeling

10. UBAB
Sales Price Variance
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

11. What does it mean when liability and equity are greater than assets?
Pro Forma that includes The Plug
It means that the firm has generated more cash than what they planned to consume
Retention rate - net income retained after tax
1. Reduce payout ratio 2. External financing

12. VCBAA
Variable Cost Variance
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
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets

13. Sustainable growth rate
Sales Price 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 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

14. What are is the tool used for Financial Planning?
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
Maximize the value of stockholders' stake
Financial Modeling
Variable Cost Variance

15. What is the goal of financial managers?

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16. Net new financing
1. Reduce payout 2. Issue new debt 3. Raise new equity
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
Maximize the value of stockholders' stake

17. Second Pass Pro Forma
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
Usage Variance

18. SVABB
1. Reduce payout 2. Issue new debt 3. Raise new equity
Sale Volume Variance
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

19. SPABA
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
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

20. If a firm pays dividends - what happens to its Internal Growth Rate?
Reduced
When it is a good time to expand or delay expansion
Retention rate - net income retained after tax
Maximize the value of stockholders' stake

21. Plow back ratio
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
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.
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales

22. 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
Usage Variance
Sales Price Variance