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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. What is optimal Timing and Delay Option?
1. Reduce payout 2. Issue new debt 3. Raise new equity
When it is a good time to expand or delay expansion
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
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. In financial Planning - what do we forecast?
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
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

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

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4. UBAB
When it is a good time to expand or delay expansion
1. Reduce payout 2. Issue new debt 3. Raise new equity
Usage Variance
Sale Volume Variance

5. The plug
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
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
Variable Cost Variance

6. What is assumed in the sustainable growth rate?
Usage Variance
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
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. Internal Growth Rate - what must a firm do to grow faster?
1. Financial statements 2. Cash flows
Sales Price Variance
1. Reduce payout ratio 2. External financing
New financing is needed - the firm must borrow or issue new equity to fund the shortfall

9. Net new 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
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Usage Variance

10. Plow back ratio
Usage Variance
Reduced
New financing is needed - the firm must borrow or issue new equity to fund the shortfall
Retention rate - net income retained after tax

11. What are is the tool used for Financial Planning?
1. Reduce payout ratio 2. External financing
Financial Modeling
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

12. Sustainable growth rate - what must a firm do to grow faster?
Financial Modeling
When it is a good time to expand or delay expansion
1. Reduce payout 2. Issue new debt 3. Raise new equity
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

13. What does it mean when liability and equity are greater than assets?
Usage Variance
It means that the firm has generated more cash than what they planned to consume
Reduced
Maximize the value of stockholders' stake

14. SVABB
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
The amount of additional external financing a firm needs to secure to pay for the planned increase of assets
Sale Volume Variance

15. 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
1. Some external financing 2. No new equity is issued 3. Issuing as much new debt as can be supported by those retaining
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

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
Variable Cost Variance
It means that the firm has generated more cash than what they planned to consume
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

17. What is the goal of financial managers?

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18. SPABA
Sales Price Variance
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.
Reduced

19. 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
1. Reduce payout 2. Issue new debt 3. Raise new equity
Variable Cost Variance

20. What does it mean when assets are greater than liability and equity?
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
Pro Forma that includes The Plug
1. Reduce payout 2. Issue new debt 3. Raise new equity

21. If a firm pays dividends - what happens to its Internal Growth Rate?
Variable Cost Variance
Financial Modeling
Reduced
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

22. Second Pass Pro Forma
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
A forecasting method that assumes that as sales grow - many income statement and balance sheet items will grow - remaining the same percentage of sales
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