Pro forma statements are tools used by the company to monitor its profitability and obligations for the previous and/or current year. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Pro forma statements are tools used by the company to forecast its profitability and obligations for the coming year.
Name three things that a pro forma income statement can tell us. What will be an ideal response? ANSWER Answer: For every sales dollar, it tells us the following three things: the percentage of the cost of goods sold, the percentage of profit, and the percentage paid out in dividends. For example, consider […]
What does a pro forma statement do? On what inputs does a pro forma statement rely? What will be an ideal response? ANSWER Answer: A pro forma statement sets out the financial predictions of a company on an “as if” basis–that is, it projects future performance based on a set of operating and […]
Which of the following is the least likely source of funding for a venture that is in the seed stage of development? a. angel financiers b. bootstrapping c. banks ANSWER C
The EBIT-EPS approach to capital structure proposes that an optimal capital structure be selected which ________. A) maximizes the weighted average cost of capital B) minimizes the cost of debt C) maximizes the EPS D) minimizes dividends ANSWER C
Other factors remaining constant, an increase in the average collection period will result in ________. A) an increase in the operating cycle B) an increase in the average payment period C) a decrease in the operating cycle D) a decrease in the average payment period ANSWER A
TRUE or FALSE: VCs are rarely involved in the governance and management of a venture that they finance. a. TRUE b. FALSE ANSWER B
A firm has interest expense of $145,000, preferred dividends of $25,000, and a tax rate of 40 percent. The firm’s financial breakeven point is ________. A) $ 25,000 B) $170,000 C) $186,667 D) $145,000 ANSWER C
When estimating the impact of a capital project on a pro forma balance sheet, one should note that financing can come from a variety of sources. The resources can include increases in current assets and long-term assets. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: When estimating the impact […]
A pro forma statement sets out the financial predictions of a company on an “as if” basis—that is, it projects future performance based on a set of operating and sales facts. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: A pro forma statement sets out the financial predictions of […]
