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5.0
FINANCIAL MODELING EXAM QUESTIONS WITH
DETAILED VERIFIED ANSWERS (100% CORRECT
ANSWERS) /ALREADY GRADED A+
Which are the two points that identify the break even unit sales?
Ans: 1. Where the Sales revenue line crosses the Total costs line
2. Where accounting profit hits zero and changes from negative to positive
What is the formula for accounting profit?
Ans: Revenue - Total Costs, because
Describe and Explain the relationship between NPV and Year 1 Unit
Sales
Ans: They have a direct relationship because PV of Net cash flows rises as
year 1 unit sales rises
Is NPV more sensitive to Year 1 Unit sales or year 2 sales growth rate?
Ans: NPV is more sensitive to growth rate because growth rate is
compounded
List the general steps used to forecast the financial statements
Ans: 1. Use financial statements to find which income statement items and
balance sheet items are close to being a constant percentage of sales and
which aren't
2 Forecast sales
3. Apply average historic percentage of sales to generate most of the
income statement and balance sheet
Sunday, 02 March 2025
, 4. Use forecasting to generate the rest of teh statements
5. Make balance sheet balance by calculating longer term debt
6. Raise or lower the portion of equity relatiev to the portion of debt by
raising/lowering paid in capital
List 6 major individual income statement and balance sheet items that
are not constant percentages of sales
Ans: 1. Depreciation
2. Interest Expense
3. Taxes
4. Property Plant and Equipment
5. Short Term Debt
6. Long term debt
Fully describe and explain the relationship between external funds
needed and sales growth rate
Ans: External funds needed is very sensitive to sales growth rate, they have a
positive linear relationship because most items are a percentage of sales
Fully explain why the discount rate is increasing over years
Ans: discount rate increases over the years because the inflation rate and
the real cost of capital increases each year. These two figures (real cost of
capital and inflation rate) are a part of calculating discount rate, they have a
direct relationship
Examstudy - Stuvia US
In today's fast-paced educational landscape, students need reliable resources to excel in their studies.
5.0
FINANCIAL MODELING EXAM QUESTIONS WITH
DETAILED VERIFIED ANSWERS (100% CORRECT
ANSWERS) /ALREADY GRADED A+
Which are the two points that identify the break even unit sales?
Ans: 1. Where the Sales revenue line crosses the Total costs line
2. Where accounting profit hits zero and changes from negative to positive
What is the formula for accounting profit?
Ans: Revenue - Total Costs, because
Describe and Explain the relationship between NPV and Year 1 Unit
Sales
Ans: They have a direct relationship because PV of Net cash flows rises as
year 1 unit sales rises
Is NPV more sensitive to Year 1 Unit sales or year 2 sales growth rate?
Ans: NPV is more sensitive to growth rate because growth rate is
compounded
List the general steps used to forecast the financial statements
Ans: 1. Use financial statements to find which income statement items and
balance sheet items are close to being a constant percentage of sales and
which aren't
2 Forecast sales
3. Apply average historic percentage of sales to generate most of the
income statement and balance sheet
Sunday, 02 March 2025
, 4. Use forecasting to generate the rest of teh statements
5. Make balance sheet balance by calculating longer term debt
6. Raise or lower the portion of equity relatiev to the portion of debt by
raising/lowering paid in capital
List 6 major individual income statement and balance sheet items that
are not constant percentages of sales
Ans: 1. Depreciation
2. Interest Expense
3. Taxes
4. Property Plant and Equipment
5. Short Term Debt
6. Long term debt
Fully describe and explain the relationship between external funds
needed and sales growth rate
Ans: External funds needed is very sensitive to sales growth rate, they have a
positive linear relationship because most items are a percentage of sales
Fully explain why the discount rate is increasing over years
Ans: discount rate increases over the years because the inflation rate and
the real cost of capital increases each year. These two figures (real cost of
capital and inflation rate) are a part of calculating discount rate, they have a
direct relationship
Examstudy - Stuvia US
