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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. Net new financing
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
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. Reduce payout 2. Issue new debt 3. Raise new equity

2. What is assumed in the sustainable growth rate?
1. Reduce payout 2. Issue new debt 3. Raise new equity
When it is a good time to expand or delay expansion
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining

3. What is optimal Timing and Delay Option?
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
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

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

5. VCBAA
Variable Cost Variance
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
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. SVABB
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
Sale Volume Variance
Sales Price Variance
Financial Modeling

7. 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
Pro Forma that includes The Plug
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Financial Modeling

8. What is the goal of financial managers?

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

10. Plow back ratio
Reduced
Retention rate - net income retained after tax
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. Reduce payout ratio 2. External financing

11. Percentage of sales method
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales

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

13. What does it mean when assets are greater than liability and equity?
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Sale Volume Variance
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.

14. UBAB
Usage Variance
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
It means that the firm has generated more cash than what they planned to consume

15. 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
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

16. SPABA
Reduced
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
Sale Volume Variance

17. In financial Planning - what do we forecast?
Sale Volume Variance
1. Financial statements 2. Cash flows
Maximize the value of stockholders' stake
It means that the firm has generated more cash than what they planned to consume

18. Internal growth rate

19. What are is the tool used for Financial Planning?
Sale Volume Variance
Financial Modeling
Sales Price Variance
Retention rate - net income retained after tax

20. 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
It means that the firm has generated more cash than what they planned to consume
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

21. What does it mean when liability and equity are greater than assets?
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity 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
Financial Modeling
It means that the firm has generated more cash than what they planned to consume

22. Internal Growth Rate - what must a firm do to grow faster?
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
The maximum growth rate the firm can sustain without issuing new equity or increasing or increasing its debt to equity ratio.
Sales Price Variance