Financial Forecasting MCQs
Financial Forecasting MCQs
The following Financial Forecasting MCQs have been compiled by our experts through research, in order to test your knowledge of the subject of Financial Forecasting. We encourage you to answer these 100+multiple-choice questions to assess your proficiency.
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1: True or False? Probability models are often used for financial forecasts.
A. True
B. False
2: The indicator approach takes into account:
A. (None of these)
B. GDP
C. unemployment figures
D. (All of these)
3: True or False? Bayes theorem is often used in financial forecasting.
A. True
B. False
4: What are the two overarching financial forecasting approaches?
A. Qualitative and Quantitative
B. Exponential and Qualitative
C. Average and Exponential
D. Rate Conversation and Sales Smoothing
5: Which of the following is NOT a forecasted financial statement?
A. Pro forma Statement of Financing
B. Pro forma Income Statement
C. Pro forma Balance Sheet
D. Pro forma Statement of Cash Flows
6: True of False? The longer the financial forecast, the more accurate it will be.
A. True
B. False
7: Which type of security is used as a measurement of a low risk rate?
A. LIBOR
B. corporate bonds
C. government bonds
D. (none of these)
8: Which of the following items would NOT be included in a cash budget?
A. Taxes
B. Depreciation
C. Cash receipts
D. Payments to Suppliers
9: What does DCF stand for?
A. Discounted Cash Financials
B. Discounted Cash Flow
C. Discount Cash Flow
D. Discount Cash Financial
10: Company XYZ has a project that requires an immediate investment of $100,000 which management has calculated to have discounted cash inflows of $105,000. This project is:
A. Acceptable, because the Net Present Value (NPV) is equal to the required rate of return.
B. Not acceptable, because it has a negative Profitability Index.
C. Acceptable, because it has a positive Net Present Value (NPV).
D. Not acceptable, because the Internal Rate of Return (IRR) is negative.
11: True or False? Present value is the future amount of money that is discounted to today.
A. False
B. True
12: What is the discount rate often used in capital budgeting that makes the Net Present Value (NVP) of all cash flows from a particular project equal to zero:
A. Rate of Asset Return (RAR)
B. Turnover Rate
C. Internal Rate of Return (IRR)
D. Price to Earnings (P/E)
13: True or False? The Monte Carlo method is often used in modeling.
A. False
B. True
14: Management will use sensitivity analysis during financial forecasting to:
A. Analyze foreign economic conditions to determine currency risk.
B. Determine how different values of an independent variable will impact a particular dependent variable under a set of stated assumptions.
C. Determine the type of forecasting method to use.
D. Analyze how previous financial forecasts performed versus actual company performance.
15: Projected financial statements are called:
A. SEC 10K Filings
B. Pro Forma Financial Statements
C. Cash Budgets
D. Annual Reports
16: True or False? Dividend structure and Capital structure are crucial to financial models
A. False
B. True
17: True of False? Forecasting future revenues is one of the most difficult aspects when preparing a financial forecast.
A. True
B. False
18: True or False? A foward price-earning ratio is an example of financial forecasting.
A. True
B. False
19: Which of the following helps create a financial model?
A. gross margin
B. expected tax rate
C. (All of these)
D. growth rate
20: A cash forecast is an estimate of future inflows of revenue and _______?
A. outflows of profits
B. outflows of expenses
C. inflows of expenses
21: True or False? Use of historical data is irrelevant to a financial forcast.
A. True
B. False
22: True or False? Predicting revenue is not part of financial forecasting.
A. True
B. False
23: True or False? Forecasting is based on historical information and assumptions.
A. False
B. True
24: What does EBIT stand for?
A. Earnings before Interest and Tax
B. Earnings before Interest and Taxable Income
C. Earnings before Income and Tax
25: What is financial forecasting?
A. Estimation of a company's future financial situation
B. Determination of a company's current financial situation
C. (None of these)
26: Which of the following could be used in financial forecasts?
A. Historical data of earnings
B. Information on balance sheets
C. (All of these)
D. financial models
27: The primary purpose of a cash budget is:
A. To determine the cash collection pattern
B. To determine monthly cash receipts
C. To determine whether the company has enough cash to fulfill regular operations or will generate excess cash
D. To divide the income statement into monthly periods
28: True or False? A sensitivity analysis is changing a value or an original assumption to see what effect it has on the overall model.
A. False
B. True
29: True of False? Forecasting future costs can be estimated by using historical data.
A. False
B. True
30: Financial forecasting is used for:
A. private companies
B. public companies
C. countries
D. (All of these)
31: True or False? A Monte Carlo distribution could be a bell curve.
A. True
B. False
32: True or False? Financial forecasting can always predict future events.
A. False
B. True
33: A security that has a beta of less than 1 has __________?
A. higher volatility than the market
B. lower volatility than the market
34: True or False? Verification is the process of comparing actual results and predicted results.
A. True
B. False
35: What is the formula for compound interest?
A. (1+i)^t
B. (1+ it)
C. (1+it) / (t)
D. (1+i) / (t)
36: Which of the following balance sheet items is NOT likely to vary directly with changes in revenue?
A. Accounts Receivable
B. Accounts Payable
C. Inventory
D. Long-term Debt
37: Which of the following capital budgeting techniques calculates the length of time required to recover the initial investment for a project?
A. Payback Method
B. Simple Rate of Return Method
C. Discounted Cash Flow Method
D. Internal Rate of Return Method
38: True or False? The Bayesian Probablity method is used often for financial forecasting.
A. True
B. False
39: Which equation is best for forecasting future sales?
A. Forecasted Sales = Current Sales(1 + Growth Rate)
B. Forecasted Sales = Current Sales(1 - Growth Rate)
C. Forecasted Sales = Current Sales + (1 + Growth Rate)
D. Forecasted Sales = Current Sales(1 + Growth Rate)^2
40: Which Method uses historical data as the basis of estimating future outcomes/information
A. Judgmental Methods
B. Artificial Intelligence Methods
C. Time Series
D. Econometric Forecasting Methods
41: True or False? The problem with Monte Carlo analysis is that you can only run one trial.
A. False
B. True
42: A company’s Sustainable Rate of Growth (SRG) is determined by which of the following:
A. SRG = Common Equity/Assets
B. SRG = Net Income/Common Equity
C. SRG = Sales/Assets
D. SRG = ROE*(1 - Dividend Payout Ratio)
43: Which of the following pro forma statements is likely to be calculated first while forecasting financials?
A. Statement of Retained Earnings
B. Statement of Cash Flow
C. Income Statement
D. Balance Sheet
44: Which of the following is an example of financial forecasting?
A. PE ratio
B. Forward PE ratio
C. Tailing PE ratio
D. Market capitalization
45: The time series method:
A. most commonly used
B. gives less importance to extreme data points
C. takes into account several methods using past and current data
D. (All of these)
46: True or False? Black swan events are typically included in financial forecasts.
A. False
B. True
47: Which of the following items is NOT likely found on a capital budget?
A. Replacement Equipment
B. Exisiting Inventory
C. New Equipment
D. Research and Development
48: What is an example of qualitative forecasting technique?
A. Last Period Demand
B. Simple Exponential Smoothing
C. Delphi Method
D. Seasonal Indexes
49: The Delphi method is a type of:
A. linear model
B. (None of these)
C. quantitative model
D. qualitative model
50: Which of the following is not included under the quantitative forecasting method?
A. Trend Analysis
B. Naive Method
C. Delphi Method
D. Moving Average
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