A capitalization summary would show ______________________.
Net Income, Cash, and Retained Earnings 0.0%
Operating Expenses and Tax Liability 0.0%
Change in Accounts Receivable 0.0%
Valuation, Investment, and Ownership % 100.0%
A company has a post-money valuation of $500,000. The last investor put in $100,000. The pre-money valuation before the investor came in was _________________.
$400,000 100.0%
$600,000 0.0%
$1,000,000 0.0%
$100,000 0.0%
A company has a pre-money valuation of $1,000,000. An investor will invest $100,000. The post-money valuation is _________________.
$900,000 0.0%
$1,000,000 0.0%
$1,100,000 100.0%
$2,200,000 0.0%
A normal revenue model will _______________.
decline in revenue due to restructuring 0.0%
decline in revenue as the initial buzz wears off 0.0%
have straight line revenues 0.0%
increase revenues over time 100.0%
A simple method of calculating variance is to _________________.
apply a percentage increase/decrease to each line item on the P&L 100.0%
build an entirely new model for each 0.0%
use current interest rates 0.0%
look at the company's FICA score 0.0%
Ad Revenue, which is revenue generated by placing advertisements of other companies on your site, can be modeled by _________________.
assuming a fixed amount each year and applying it to all years 0.0%
assuming that Google's ad rates apply 0.0%
figuring the average revenue per ad multiplied by the expected number of advertisement spots in a given period 100.0%
figuring the average sales revenue on other products 0.0%
An operating budget in a corporate setting is usually prepared ________________.
for the following fiscal year 100.0%
for the next 5 years 0.0%
one month at a time 0.0%
None of the above; an operating budget is not typically created in a corporate setting. 0.0%
Another name for the Balance Sheet is ____________________.
Statement of Financial Position 100.0%
Cash Flow Statement 0.0%
Statement of Retained Earnings 0.0%
Statement of Accounts 0.0%
Another way to express the Balance Sheet formula is ________________.
Cash = Liabilities 0.0%
Equity = Assets - Liabilities 100.0%
Net Income = Assets - Liabilities 0.0%
Retained Earnings = Assets + Liabilities 0.0%
Capitalization is defined as ______________________.
the debt structure of a company 0.0%
the capital structure of a company 100.0%
current assets 0.0%
the annual net income 0.0%
Companies calculate their valuation for the purpose of _____________________.
determining their Net Income 0.0%
seeing if they can get credit from the bank 0.0%
determining their tax liability 0.0%
using the outcome as a basis for working with investors and deciding how much equity an investment is worth 100.0%
Depreciation on the Balance Sheet reflects ___________________.
the current period depreciation 0.0%
Tax Liability 0.0%
Total Assets 0.0%
cumulative depreciation on fixed assets 100.0%
For a startup company looking to gain investor interest, which of the following seems like a reasonable amount of time to forecast ahead?
6 months 0.0%
1 year 0.0%
5 years 100.0%
20 years 0.0%
For most new ventures in the process of creating a forecast, the expense that warrants the most detailed analysis and input is _____________.
wages 100.0%
rent 0.0%
telephone and utilities 0.0%
benefits 0.0%
For which of the following company structures is it easiest to issue shares?
LLC 0.0%
C Corporation 100.0%
Sole Proprietorship 0.0%
LLP 0.0%
How is Cash at the beginning of the period determined?
It depends on the company's AR level. 0.0%
It is determined by looking at revenues. 0.0%
It is determined through a complex calculation involving interest. 0.0%
It is taken from the prior period's ending cash balance. 100.0%
How is income tax forecasted?
By applying the prevailing corporate tax rate to any income for the period 100.0%
By showing it escalating over time 0.0%
By assuming zero unless profits exceed $1 million 0.0%
By tax professionals who handle forecasting separately 0.0%
In a variance/sensitivity analysis, a company will typically calculate _________________.
only a worst case scenario 0.0%
only a best case scenario 0.0%
both best case and worst case scenarios of altered revenues and expenses 100.0%
None of the above; most companies won't do a variance/sensitivity analysis. 0.0%
In general, a financial plan can be defined as _____________________.
a plan for spending, saving, and generating revenue 100.0%
a 10-year strategy plan 0.0%
the prior year's financial reports 0.0%
a plan to be used only by the Board of Directors 0.0%
In what way are the Balance Sheet and the Cash Flow Statement linked in a dynamic forecast?
There is no relationship between the two. 0.0%
Changes in Accounts Receivable are carried over to the Cash Flow Operating Activities section. 100.0%
Net Income is determined on the Balance Sheet and carried over to the Cash Flow Statement. 0.0%
Tax liability is calculated using both statements. 0.0%
In what way are the Cash Flow Statement and the Balance Sheet linked in a dynamic forecast?
They are not interrelated. 0.0%
Cash from the Cash Flow Statement is carried over to the Balance Sheet cash line. 100.0%
Equity from the Balance Sheet is transferred to the Cash Flow Statement. 0.0%
Accounts Receivable is transferred from the Cash Flow Statement to the Balance Sheet. 0.0%
In what way are the Income Statement and the Balance Sheet linked in a dynamic forecast?
Change in Accounts Receivable is determined on the Income Statement. 0.0%
Ending cash balance is brought from the Income Statement to the Balance Sheet. 0.0%
There is no relationship between the two. 0.0%
Net income is carried over to the Equity section. 100.0%
In what way are the Income Statement and the Cash Flow Statement linked in a dynamic forecast?
Change in Accounts Receivable is carried forward to the Cash Flow Statement. 0.0%
Depreciation Expense is carried forward to the Cash Flow Statement. 0.0%
Net Income is carried over to the first line of the Cash Flow Statement. 100.0%
Rent expense is used on the Cash Flow Statement. 0.0%
In which of the following sections would a startup company record an investment by a venture capital firm?
Cash from Investing 100.0%
Net Income 0.0%
Cash from Operations 0.0%
Cash from Financing 0.0%
In which of the following sections would Change in Accounts Receivable be recorded?
Cash from Investing 0.0%
Net Income 0.0%
Cash from Operations 100.0%
Cash from Financing 0.0%
In which of the following ways would typical Rent Expense be modeled?
Consistent over the next five years 0.0%
Based on average rent in major metropolitan areas 100.0%
Always assuming a 10% growth per year 0.0%
Related to both the number of employees and natural increases in rent 0.0%
Is income tax forecasted?
Yes, usually 100.0%
Never 0.0%
Not unless required by the country law 0.0%
Yes, but only if the company is forecasted to earn over $1 million 0.0%
Naming assumption cells is helpful because ____________________.
it allows for easier creation and tracking of formulas built into the model 100.0%
formulas will not work unless they are named 0.0%
it prevents subsequent users from editing the cells 0.0%
management cannot decipher any hidden references 0.0%
Net Income on the Balance Sheet reflects _______________.
Net Income for the current month 0.0%
year-to-date Net Income 100.0%
Change in Assets from inception 0.0%
Tax liability 0.0%
One method of calculating the valuation of a company is ________________.
Accounts Payable change 0.0%
Discounted Cash Flows 100.0%
Retained Earnings Growth 0.0%
Tax Liability discounted 0.0%
Operating expenses should ____________________.
be summarized, showing one lump sum per period 0.0%
be organized by department 100.0%
be detailed, showing each line item that the actual P&L will have 0.0%
not be included 0.0%
Overall, what is the purpose of a Cash Flow Statement?
It shows how the company received and spent cash each period. 100.0%
It is used to determine whether a company should pay dividends. 0.0%
It shows Net Income. 0.0%
It determines tax liability. 0.0%
Retained Earnings reflect ____________________.
the cumulative Net Income for a company from inception until its last reporting year 100.0%
Net Income for the current year 0.0%
Change in Assets 0.0%
Change in Liabilities 0.0%
Revenues on the Profit & Loss should be changed ___________________.
by inputting them directly into the cells 0.0%
through the accounting system 100.0%
by showing change in cash flow 0.0%
by changing assumptions on the assumptions page 0.0%
Should a summary include metrics such as Gross Margin %?
Yes, they are good high-level indicators. 100.0%
Yes, it is required by law. 0.0%
No, they are excessive information. 0.0%
No, they are too complex for a summary. 0.0%
The basic formula for a Balance Sheet is __________________.
Cash = Liabilities 0.0%
Assets = Liabilities + Equity 100.0%
Net Income = Assets - Liabilities 0.0%
Retained Earnings = Assets + Liabilities 0.0%
The majority ownership of a private company is typically held by __________________.
private bankers 0.0%
venture capital firms 100.0%
employees 0.0%
company officers 0.0%
The most logical formatting convention for assumptions would be ___________________.
to use a 10-color coding scheme 0.0%
to spread assumptions throughout the entire model 0.0%
to outline and use red text in all input cells, and to add a note at the top of the assumptions stating that only red-text cells are to be changed, with uniform formatting and assumptions placement 100.0%
to use no particular formatting, but to make the assumptions simple with black text and no highlighting 0.0%
The Net Income on the Cash Flow Forecast comes from the __________________.
Balance Sheet 0.0%
Statement of Retained Earnings 0.0%
Forecasted Profit & Loss Statement 100.0%
Variance Analysis 0.0%
The primary financial statements that are forecast are _________________.
income statement only 0.0%
retained earnings and cash flow 0.0%
balance sheet and trial balance 0.0%
income statement, balance sheet, and cash flow 100.0%
The purpose of a worst case analysis is to _____________________.
show the best possible result 0.0%
advise the reader not to invest 0.0%
show that management is competent 0.0%
show what the results would be if things do not work out as forecasted 100.0%
The term "burn rate" refers to ______________.
the total operating expenses 50.0%
the amount of cash a company spends on average in a given period 50.0%
the total fixed asset expenditures 0.0%
revenue growth 0.0%
The term "revenue driver" refers to ____________________.
the per-unit sales price 0.0%
any factor that drives revenue, such as site impressions 100.0%
the total revenue by product 0.0%
the total revenue 0.0%
To be as specific as possible, a revenue forecast should ______________.
be summarized by year 0.0%
be summarized by quarter 0.0%
be detailed month by month 100.0%
show a total for five years 0.0%
To calculate a best case scenario, a company would ____________ and ____________.
increase revenue streams, decrease operating expenses 100.0%
increase operating expenses, increase revenues 0.0%
decrease revenues, increase operating expenses 0.0%
show no change to revenue, show change only to operating expenses 0.0%
To calculate a worst case scenario, a company would ____________ and ____________.
increase revenue streams, decrease operating expenses 0.0%
increase operating expenses, increase revenues 0.0%
decrease revenues, increase operating expenses 100.0%
show no change to revenue, show change only to operating expenses 0.0%
Valuation can be calculated by ____________________.
discounting net income for the next several years 100.0%
applying a fixed percentage to tax liability 0.0%
examining Rent Expense 0.0%
Total Retained Earnings 0.0%
Valuation is a ______________________.
result of Net Income, Sales, and Cash Flow 50.0%
result of Accounts Receivable 0.0%
result of Accounts Payable 0.0%
result of Equity and Retained Earnings 50.0%
Valuation will typically trend _______________.
in a straight line; valuation does not change 0.0%
upwards over time as the company increases sales 100.0%
downwards over time as the company increases sales 0.0%
upwards over time as the company decreases sales 0.0%
What does an increasing trend in Accounts Payable indicate for a company?
It indicates nothing in particular. 0.0%
The company is making better use of its cash and is not paying bills as quickly. 100.0%
Cash is being mismanaged. 0.0%
Net Income is increasing. 0.0%
What is meant by the term "post-money valuation"?
The valuation of a company before collecting accounts receivable 0.0%
The valuation of a company after collecting all accounts receivable 0.0%
The valuation of a company after an investment round 100.0%
The valuation of a company before an investment round 0.0%
What is meant by the term "pre-money valuation"?
The valuation of a company before collecting accounts receivable 0.0%
The valuation of a company after collecting all accounts receivable 0.0%
The valuation of a company after an investment round 0.0%
The valuation of a company before an investment round 100.0%
What is the purpose of a summary page?
It is required by the IRS. 0.0%
It saves the financial model creator from having to delve into details. 0.0%
It makes the financial model creator look smart. 0.0%
It gives a quick overview of the forecasted outcomes for various financials. 100.0%
What purpose does a central assumptions input tab serve in an Excel-based forecast?
It adds a level of complexity. 0.0%
It helps create an easy-to-use spreadsheet in which all inputs are located in one place. 100.0%
There is no particular purpose for it; it is simply required by law. 0.0%
There is no particular purpose for it; it is simply required by the SEC. 0.0%
Which of the following decisions could be made by examining the Balance Sheet?
To increase production 0%
To hire another key executive 0%
To reduce payroll by 20% 0%
To collect more aggressively on a growing receivables balance 0%
Which of the following decisions could be made by looking at the Balance Sheet?
To move offices 0.0%
To invest excess cash into higher-yield investments 100.0%
To reduce employee benefits 0.0%
To outsource payroll functions 0.0%
Which of the following decisions would best be made by looking at cash flow?
Decisions about inventory management 0.0%
Decisions about tax planning 0.0%
The decision to spend less on capital assets and pay down payables in the next period 100.0%
The decision to increase production 0.0%
Which of the following is NOT an operating expense?
Rent 0.0%
Accounts Payable 100.0%
Insurance 0.0%
Bank fees 0.0%
Which of the following is the accepted format for a forecasted Balance Sheet?
Expenses first, then Revenue 0.0%
Revenue, COGS, Operating Expenses 0.0%
Taxes, COGS, Revenue, Operating Expenses 0.0%
Assets, Liabilities, Equity 100.0%
Which of the following is the accepted format for a forecasted Cash Flow Statement?
Net Income, Operating Activities, Financing Activities, Investing Activities 100.0%
Revenue, COGS, Operating Expenses 0.0%
Taxes, COGS, Revenue, Operating Expenses 0.0%
Assets, Liabilities, Equity 0.0%
Which of the following is the accepted format for a forecasted P&L?
Expenses first, then Revenue 0.0%
Revenue, COGS, Operating Expenses 100.0%
Taxes, COGS, Revenue, Operating Expenses 0.0%
Assets, Liabilities, Equity 0.0%
Which of the following parties should be kept in mind when creating a financial forecast?
The government 0.0%
The end user 100.0%
The financial model builder 0.0%
The Board of Directors 0.0%
Which of the following represents three possible revenue streams for an online venture?
Product Sales, In-Store Sales, Bulk Purchases 0.0%
Ad Revenue, Affiliate Revenue, Product Sales 100.0%
In-Store Sales, Ad Revenue, Product Sales 0.0%
In-Store Sales, Affiliate Revenue, Product Sales 0.0%
Which of the following would be a logical arrangement for showing revenue?
Summary totals 0.0%
Detailed by revenue stream 100.0%
Detailed by sales person 0.0%
Summarized by sales person 0.0%
Which of the following would be the most useful forecasting interval?
Monthly 100.0%
Quarterly 0.0%
Yearly 0.0%
Weekly 0.0%
Which of the following would most likely be included on a summary page for Balance Sheet data?
Total Assets, Total Liabilities, Total Equity 100.0%
Net Income, Total Sales, Total Operating Expense 0.0%
Cash Balance, Cash Inflows, Cash Outflows 0.0%
Retained Earnings and Cash 0.0%
Which of the following would most likely NOT be included on summary financials?
Net Income 0.0%
Total Assets 0.0%
Accounts Payable 100.0%
Sales 0.0%
Which of the following would NOT be included on a summary page?
Cash Balance 0.0%
Net Income 0.0%
Payroll Expense 100.0%
Total Equity 0.0%
Which of the following would one expect to be the highest expense?
Liability insurance 0.0%
Salaries 100.0%
Benefits 0.0%
Office supplies 0.0%
Why does a Balance Sheet balance (assets = liabilities + equity)?
It is required by law. 0.0%
Companies force it to balance. 0.0%
Accounting is a double-entry system of equal debits and credits. 100.0%
Auditors make adjustments to make it balance. 0.0%
Why is Change in Accounts Payable added back to Net Income?
There is no reason to do so. 100.0%
An increase in AP reflects the fact that the company did not spend cash on paying its bills. 0.0%
It is required by the SEC. 0.0%
It is required by IRS tax law. 0.0%
Why is it important to create assumptions for all possible changing variables?
It's not important; there is no real value in doing so. 0.0%
It makes the model overly complex and difficult to use. 0.0%
It allows the user to avoid paying taxes. 0.0%
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. 100.0%
Why is it reasonable for a startup company to forecast a Net Loss for several years?
A company can never make money in its first years. 0.0%
It reduces tax liability in future years. 0.0%
As the company launches and grows, expenses will often exceed any revenue-generating abilities; hence, the expected payoff will not come until future years. 50.0%
It's not reasonable and should not be done. 50.0%
Why might someone forecast future years as one annual number?
The forecaster is lazy. 0.0%
It is the best method for forecasting future years. 0.0%
It saves management time and energy. 0.0%
Because it is difficult to predict what will happen, applying a growth percentage to the year is the most reasonable assumption. 100.0%
Why would a company be conservative when projecting revenues?
Being conservative is better than being overly optimistic. 100.0%
The company wants to show the highest possible revenue. 0.0%
Being conservative reduces the firm's tax liability. 0.0%
Being conservative is required by law. 0.0%
Why would a company perform a variance/sensitivity analysis?
It is a required financial statement. 0.0%
Auditors will ask for it. 0.0%
Shareholders require the document. 0.0%
To see how the forecast model changes based on changing dynamic inputs 100.0%
Why would an investor be interested in a company's pre-money valuation?
The investor is required by law to ask for the pre-money valuation. 0.0%
Knowing the valuation allows the investor to secretly calculate how much he can expect in return. 0.0%
Knowing the valuation helps the investor put his investment in perspective and understand how it is relative to the capital already in the company. 100.0%
Knowing the valuation gives the investor the ability to calculate net income. 0.0%
Would it be better to create detailed input that individually forecasts expenses or to create a simple, one-line input for Operating Expenses?
Simple input: it will save the end user a lot of time. 0.0%
Simple input: it's not worth figuring out the specifics of Operating Expenses. 0.0%
Detailed input: each expense grows based on different variables. 100.0%
Detailed input: the model looks more impressive if there are more line items. 0.0%