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Financial Forecasting Test Answers

This is an important test for Finance and Accounting experts. If you are looking for an impressive Upwork profile then the test is for you, try this test out. Here you will find most recent test questions and correct answers for Upwork Financial Forecasting test of Upwork Finance and Accounting category. It will help you to get the related jobs. Search your desired answers of the test questions by pressing Ctrl + F button.
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1. 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 _________________.
 Answers: • $400,000
 2. Why does a Balance Sheet balance (assets = liabilities + equity)?
 Answers: • Accounting is a double-entry system of equal debits and credits.

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