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Financial Modeling And Proforma Analysis

Instructions:

Answer 22 questions in 15 minutes.
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Match each statement with the correct term.
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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. Percentage of sales method
Sales Price Variance
1. Reduce payout 2. Issue new debt 3. Raise new equity
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
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales

2. In financial Planning - what do we forecast?
Sale Volume Variance
Reduced
1. Financial statements 2. Cash flows
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

3. Net new financing
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
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
Financial Modeling

4. SVABB
Variable Cost 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
Sale Volume Variance
Retention rate - net income retained after tax

5. Second Pass Pro Forma
Sales Price Variance
It means that the firm has generated more cash than what they planned to consume
Pro Forma that includes The Plug
Variable Cost Variance

6. Sustainable growth rate
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
Variable Cost Variance
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.

7. UBAB
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
Financial Modeling
Usage Variance

8. The plug
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
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
When it is a good time to expand or delay expansion

9. Internal Growth Rate - what must a firm do to grow faster?
1. Financial statements 2. Cash flows
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Variable Cost Variance
1. Reduce payout ratio 2. External financing

10. 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
It means that the firm has generated more cash than what they planned to consume
Retention rate - net income retained after tax

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

12. Plow back ratio
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
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.

13. What are is the tool used for Financial Planning?
Maximize the value of stockholders' stake
Financial Modeling
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
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

14. Internal growth rate

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15. What is the goal of financial managers?

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

17. Sustainable growth rate - what must a firm do to grow faster?
1. Reduce payout 2. Issue new debt 3. Raise new equity
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
Maximize the value of stockholders' stake

18. What is optimal Timing and Delay Option?
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
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
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets

19. What does it mean when liability and equity are greater than assets?
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
It means that the firm has generated more cash than what they planned to consume
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

20. SPABA
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
Variable Cost 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

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

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22. What is assumed in the sustainable growth rate?
Sale Volume Variance
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
Variable Cost Variance

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Financial Modeling And Proforma Analysis

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