Financial Forecasting Test
Which
of the following parties should be kept in mind when creating a financial
forecast?
a. The
government
b. The
end user
c. The
financial model builder
d. The
Board of Directors
Another
way to express the Balance Sheet formula is ________________.
a. Cash
= Liabilities
b. Equity
= Assets - Liabilities
c. Net
Income = Assets - Liabilities
d. Retained
Earnings = Assets + Liabilities
Which
of the following is the accepted format for a forecasted Balance Sheet?
a. Expenses
first, then Revenue
b. Revenue,
COGS, Operating Expenses
c. Taxes,
COGS, Revenue, Operating Expenses
d. Assets,
Liabilities, Equity
A
simple method of calculating variance is to _________________.
a. apply
a percentage increase/decrease to each line item on the P&L
b. build
an entirely new model for each
c. use
current interest rates
d. look
at the company's FICA score
Another
name for the Balance Sheet is ____________________.
a. Statement
of Financial Position
b. Cash
Flow Statement
c. Statement
of Retained Earnings
d. Statement
of Accounts'
In
general, a financial plan can be defined as _____________________.
a. a
plan for spending, saving, and generating revenue
b. a
10-year strategy plan
c. the
prior year's financial reports
d. a
plan to be used only by the Board of Directors
In
which of the following sections would Change in Accounts Receivable be
recorded?
a. Cash
from Investing
b. Net
Income
c. Cash
from Operations
d. Cash
from Financing
Net
Income on the Balance Sheet reflects _______________.
a. Net
Income for the current month
b. year-to-date
Net Income
c. Change
in Assets from inception
d. Tax
liability
What
is meant by the term "pre-money valuation"?
a. The
valuation of a company before collecting accounts receivable
b. The
valuation of a company after collecting all accounts receivable
c. The
valuation of a company after an investment round
d. The
valuation of a company before an investment round
Why
is it important to create assumptions for all possible changing variables?
a. It's
not important; there is no real value in doing so.
b. It
makes the model overly complex and difficult to use.
c. It
allows the user to avoid paying taxes.
d. It
makes future updates to the model easier because the user does not need to
search for numbers embedded in formulas in the financial statements.
Which
of the following would most likely NOT be included on summary financials?
a. Net
Income
b. Total
Assets
c. Accounts
Payable
d. Sales
In
a variance/sensitivity analysis, a company will typically calculate
_________________.
a. only
a worst case scenario
b. only
a best case scenario
c. both
best case and worst case scenarios of altered revenues and expenses
d. None
of the above; most companies won't do a variance/sensitivity analysis.
Which
of the following decisions could be made by looking at the Balance Sheet?
a. To
move offices
b. To
invest excess cash into higher-yield investments
c. To
reduce employee benefits
d. To
outsource payroll functions
What
is meant by the term "post-money valuation"?
a. The
valuation of a company before collecting accounts receivable
b. The
valuation of a company after collecting all accounts receivable
c. The
valuation of a company after an investment round
d. The
valuation of a company before an investment round
For
which of the following company structures is it easiest to issue shares?
a. LLC
b. C
Corporation
c. Sole
Proprietorship
d. LLP
Operating
expenses should ____________________.
a. be
summarized, showing one lump sum per period
b. be
organized by department
c. be
detailed, showing each line item that the actual P&L will have
d. not
be included
Depreciation
on the Balance Sheet reflects ___________________.
a. the
current period depreciation
b. Tax
Liability
c. Total
Assets
d. cumulative
depreciation on fixed assets
A
capitalization summary would show ______________________.
a. Net
Income, Cash, and Retained Earnings
b. Operating
Expenses and Tax Liability
c. Change
in Accounts Receivable
d. Valuation,
Investment, and Ownership %
Retained
Earnings reflect ____________________.
a. the
cumulative Net Income for a company from inception until its last reporting
year
b. Net
Income for the current year
c. Change
in Assets
d. Change
in Liabilities
Why
would a company perform a variance/sensitivity analysis?
a. It
is a required financial statement.
b. Auditors
will ask for it.
c. Shareholders
require the document.
d. To
see how the forecast model changes based on changing dynamic inputs
In
which of the following sections would a startup company record an investment by
a venture capital firm?
a. Cash
from Investing
b. Net
Income
c. Cash
from Operations
d. Cash
from Financing
To
calculate a best case scenario, a company would ____________ and ____________.
a. increase
revenue streams, decrease operating expenses
b. increase
operating expenses, increase revenues
c. decrease
revenues, increase operating expenses
d. show
no change to revenue, show change only to operating expenses
A
normal revenue model will _______________.
a. decline
in revenue due to restructuring
b. decline
in revenue as the initial buzz wears off
c. have
straight line revenues
d. increase
revenues over time
Why
would an investor be interested in a company's pre-money valuation?
a. The
investor is required by law to ask for the pre-money valuation.
b. Knowing
the valuation allows the investor to secretly calculate how much he can expect
in return.
c. Knowing
the valuation helps the investor put his investment in perspective and
understand how it is relative to the capital already in the company.
d. Knowing
the valuation gives the investor the ability to calculate net income.
How
is Cash at the beginning of the period determined?
a. It
depends on the company's AR level.
b. It
is determined by looking at revenues.
c. It
is determined through a complex calculation involving interest.
d. It
is taken from the prior period's ending cash balance.
The
term "revenue driver" refers to ____________________.
a. the
per-unit sales price
b. any
factor that drives revenue, such as site impressions
c. the
total revenue by product
d. the
total revenue
An
operating budget in a corporate setting is usually prepared ________________.
a. for
the following fiscal year
b. for
the next 5 years
c. one
month at a time
d. None
of the above; an operating budget is not typically created in a corporate
setting.
Why
is Change in Accounts Payable added back to Net Income?
a. There
is no reason to do so.
b. An
increase in AP reflects the fact that the company did not spend cash on paying
its bills.
c. It
is required by the SEC.
d. It
is required by IRS tax law.
Overall,
what is the purpose of a Cash Flow Statement?
a. It
shows how the company received and spent cash each period.
b. It
is used to determine whether a company should pay dividends.
c. It
shows Net Income.
d. It
determines tax liability.
Which
of the following represents three possible revenue streams for an online
venture?
a. Product
Sales, In-Store Sales, Bulk Purchases
b. Ad
Revenue, Affiliate Revenue, Product Sales
c. In-Store
Sales, Ad Revenue, Product Sales
d. In-Store
Sales, Affiliate Revenue, Product Sales
In
what way are the Income Statement and the Cash Flow Statement linked in a
dynamic forecast?
a. Change
in Accounts Receivable is carried forward to the Cash Flow Statement.
b. Depreciation
Expense is carried forward to the Cash Flow Statement.
c. Net
Income is carried over to the first line of the Cash Flow Statement.
d. Rent
expense is used on the Cash Flow Statement.
To
calculate a worst case scenario, a company would ____________ and ____________.
a. increase
revenue streams, decrease operating expenses
b. increase
operating expenses, increase revenues
c. decrease
revenues, increase operating expenses
d. show
no change to revenue, show change only to operating expenses
Why
might someone forecast future years as one annual number?
a. The
forecaster is lazy.
b. It
is the best method for forecasting future years.
c. It
saves management time and energy.
d. Because
it is difficult to predict what will happen, applying a growth percentage to
the year is the most reasonable assumption.
Is
income tax forecasted?
a. Yes,
usually
b. Never
c. Not
unless required by the country law
d. Yes,
but only if the company is forecasted to earn over $1 million
What
is the purpose of a summary page?
a. It
is required by the IRS.
b. It
saves the financial model creator from having to delve into details.
c. It
makes the financial model creator look smart.
d. It
gives a quick overview of the forecasted outcomes for various financials.
To
be as specific as possible, a revenue forecast should ______________.
a. be
summarized by year
b. be
summarized by quarter
c. be
detailed month by month
d. show
a total for five years
In
what way are the Balance Sheet and the Cash Flow Statement linked in a dynamic
forecast?
a. There
is no relationship between the two.
b. Changes
in Accounts Receivable are carried over to the Cash Flow Operating Activities
section.
c. Net
Income is determined on the Balance Sheet and carried over to the Cash Flow
Statement.
d. Tax
liability is calculated using both statements.
Which
of the following would most likely be included on a summary page for Balance
Sheet data?
a. Total
Assets, Total Liabilities, Total Equity
b. Net
Income, Total Sales, Total Operating Expense
c. Cash
Balance, Cash Inflows, Cash Outflows
d. Retained
Earnings and Cash
For
a startup company looking to gain investor interest, which of the following
seems like a reasonable amount of time to forecast ahead?
a. 6
months
b. 1
year
c. 5
years
d. 20
years
Which
of the following decisions would best be made by looking at cash flow?
a. Decisions
about inventory management
b. Decisions
about tax planning
c. The
decision to spend less on capital assets and pay down payables in the next
period
d. The
decision to increase production