Question:* 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 _________________.
Answer: • $400,000
Question:* Why does a Balance Sheet balance (assets = liabilities + equity)?
Answer: • Accounting is a double-entry system of equal debits and credits.
Question:* The primary financial statements that are forecast are _________________.
Answer: • income statement, balance sheet, and cash flow
Question:* Which of the following is NOT an operating expense?
Answer: • Accounts Payable
Question:* An operating budget in a corporate setting is usually prepared ________________.
Answer: • for the following fiscal year
Question:* Why would a company perform a variance/sensitivity analysis?
Answer: • To see how the forecast model changes based on changing dynamic inputs
Question:* Depreciation on the Balance Sheet reflects ___________________.
Answer: • cumulative depreciation on fixed assets
Question:* For which of the following company structures is it easiest to issue shares?
Answer: • C Corporation
Question:* Why might someone forecast future years as one annual number?
Answer: • Because it is difficult to predict what will happen, applying a growth percentage to the year is the most reasonable assumption.
Question:* Why is it reasonable for a startup company to forecast a Net Loss for several years?
Answer: • As the company launches and grows, expenses will often exceed any revenue-generating abilities; hence, the expected payoff will not come until future years.
Question:* Which of the following represents three possible revenue streams for an online venture?
Answer: • Ad Revenue, Affiliate Revenue, Product Sales
Question:* For a startup company looking to gain investor interest, which of the following seems like a reasonable amount of time to forecast ahead?
Answer: • 5 years
Question:* Revenues on the Profit & Loss should be changed ___________________.
Answer: • through the accounting system
Question:* Is income tax forecasted?
Answer: • Yes, usually
Question:* Which of the following would NOT be included on a summary page?
Answer: • Payroll Expense
Question:* Which of the following parties should be kept in mind when creating a financial forecast?
Answer: • The end user
Question:* What does an increasing trend in Accounts Payable indicate for a company?
Answer: • The company is making better use of its cash and is not paying bills as quickly.
Question:* The Net Income on the Cash Flow Forecast comes from the __________________.
Answer: • Forecasted Profit & Loss Statement
Question:* Why is Change in Accounts Payable added back to Net Income?
Answer: • There is no reason to do so.
Question:* To calculate a worst case scenario, a company would ____________ and ____________.
Answer: • decrease revenues, increase operating expenses
Question:* A capitalization summary would show ______________________.
Answer: • Valuation, Investment, and Ownership %
Question:* In what way are the Income Statement and the Cash Flow Statement linked in a dynamic forecast?
Answer: • Net Income is carried over to the first line of the Cash Flow Statement.
Question:* Net Income on the Balance Sheet reflects _______________.
Answer: • year-to-date Net Income
Question:* What is meant by the term "post-money valuation"?
Answer: • The valuation of a company after an investment round
Question:* One method of calculating the valuation of a company is ________________.
Answer: • Discounted Cash Flows
Question:* The purpose of a worst case analysis is to _____________________.
Answer: • show what the results would be if things do not work out as forecasted
Question:* Should a summary include metrics such as Gross Margin %?
Answer: • Yes, they are good high-level indicators.
Question:* Which of the following would most likely be included on a summary page for Balance Sheet data?
Answer: • Total Assets, Total Liabilities, Total Equity
Question:* Operating expenses should ____________________.
Answer: • be organized by department
Question:* In what way are the Cash Flow Statement and the Balance Sheet linked in a dynamic forecast?
Answer: • Cash from the Cash Flow Statement is carried over to the Balance Sheet cash line.
Question:* How is income tax forecasted?
Answer: • By applying the prevailing corporate tax rate to any income for the period
Question:* In which of the following ways would typical Rent Expense be modeled?
Answer: • Based on average rent in major metropolitan areas
Question:* The term "burn rate" refers to ______________.
Answer: • the total operating expenses
Question:* Capitalization is defined as ______________________.
Answer: • the capital structure of a company
Question:* In what way are the Income Statement and the Balance Sheet linked in a dynamic forecast?
Answer: • Net income is carried over to the Equity section.
Question:* Another way to express the Balance Sheet formula is ________________.
Answer: • Equity = Assets - Liabilities
Question:* Which of the following would one expect to be the highest expense?
Answer: • Salaries
Question:* In which of the following sections would Change in Accounts Receivable be recorded?
Answer: • Cash from Operations
Question:* Which of the following decisions could be made by looking at the Balance Sheet?
Answer: • To invest excess cash into higher-yield investments
Question:* Which of the following is the accepted format for a forecasted Balance Sheet?
Answer: • Assets, Liabilities, Equity
Question:* What is meant by the term "pre-money valuation"?
Answer: • The valuation of a company before an investment round
Question:* Which of the following would be the most useful forecasting interval?
Answer: • Monthly
Question:* Why is it important to create assumptions for all possible changing variables?
Answer: • 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.
Question:* The most logical formatting convention for assumptions would be ___________________.
Answer: • 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
Question:* Which of the following decisions would best be made by looking at cash flow?
Answer: • The decision to spend less on capital assets and pay down payables in the next period
Question:* To be as specific as possible, a revenue forecast should ______________.
Answer: • be detailed month by month
Question:* Ad Revenue, which is revenue generated by placing advertisements of other companies on your site, can be modeled by _________________.
Answer: • figuring the average revenue per ad multiplied by the expected number of advertisement spots in a given period
Question:* The majority ownership of a private company is typically held by __________________.
Answer: • venture capital firms
Question:* In general, a financial plan can be defined as _____________________.
Answer: • a plan for spending, saving, and generating revenue
Question:* Why would an investor be interested in a company's pre-money valuation?
Answer: • Knowing the valuation helps the investor put his investment in perspective and understand how it is relative to the capital already in the company.
Question:* In which of the following sections would a startup company record an investment by a venture capital firm?
Answer: • Cash from Investing
Question:* In what way are the Balance Sheet and the Cash Flow Statement linked in a dynamic forecast?
Answer: • Changes in Accounts Receivable are carried over to the Cash Flow Operating Activities section.
Question:* The term "revenue driver" refers to ____________________.
Answer: • any factor that drives revenue, such as site impressions
Question:* A simple method of calculating variance is to _________________.
Answer: • apply a percentage increase/decrease to each line item on the P&L
Question:* Which of the following is the accepted format for a forecasted P&L?
Answer: • Revenue, COGS, Operating Expenses
Question:* What is the purpose of a summary page?
Answer: • It gives a quick overview of the forecasted outcomes for various financials.
Question:* Would it be better to create detailed input that individually forecasts expenses or to create a simple, one-line input for Operating Expenses?
Answer: • Detailed input: each expense grows based on different variables.
Question:* A normal revenue model will _______________.
Answer: • increase revenues over time
Question:* For most new ventures in the process of creating a forecast, the expense that warrants the most detailed analysis and input is _____________.
Answer: • wages
Question:* Overall, what is the purpose of a Cash Flow Statement?
Answer: • It shows how the company received and spent cash each period.
Question:* To calculate a best case scenario, a company would ____________ and ____________.
Answer: • increase revenue streams, decrease operating expenses
Question:* What purpose does a central assumptions input tab serve in an Excel-based forecast?
Answer: • It helps create an easy-to-use spreadsheet in which all inputs are located in one place.
Question:* Naming assumption cells is helpful because ____________________.
Answer: • it allows for easier creation and tracking of formulas built into the model
Question:* Companies calculate their valuation for the purpose of _____________________.
Answer: • using the outcome as a basis for working with investors and deciding how much equity an investment is worth
Question:* The basic formula for a Balance Sheet is __________________.
Answer: • Assets = Liabilities + Equity
Question:* Which of the following is the accepted format for a forecasted Cash Flow Statement?
Answer: • Net Income, Operating Activities, Financing Activities, Investing Activities
Question:* Which of the following would most likely NOT be included on summary financials?
Answer: • Accounts Payable
Question:* Retained Earnings reflect ____________________.
Answer: • the cumulative Net Income for a company from inception until its last reporting year
Question:* Which of the following would be a logical arrangement for showing revenue?
Answer: • Detailed by revenue stream
Question:* In a variance/sensitivity analysis, a company will typically calculate _________________.
Answer: • both best case and worst case scenarios of altered revenues and expenses
Question:* How is Cash at the beginning of the period determined?
Answer: • It is taken from the prior period's ending cash balance.
Question:* A company has a pre-money valuation of $1,000,000. An investor will invest $100,000. The post-money valuation is _________________.
Answer: • $1,100,000
Question:* Valuation can be calculated by ____________________.
Answer: • discounting net income for the next several years
Question:* Valuation will typically trend _______________.
Answer: • upwards over time as the company increases sales
Question:* Why would a company be conservative when projecting revenues?
Answer: • Being conservative is better than being overly optimistic.
Question:* Valuation is a ______________________.
Answer: • result of Net Income, Sales, and Cash Flow
Question:* Another name for the Balance Sheet is ____________________.
Answer: • Statement of Financial Position
Question:* Which of the following decisions could be made by examining the Balance Sheet?
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