Question

How does financial modeling allow Bubble & Bee to make the growth strategy decision? Select all...

How does financial modeling allow Bubble & Bee to make the growth strategy decision? Select all that apply.

a. shows amount of fixed cost to be covered in downside

b. demonstrates ability to make debt payments

c. shows volatility of cash flow in future

d. shows impact to operating cash flow used to invest in future business

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Answer #1

The following options apply:

a. shows the amount of fixed cost to be covered in downside

b. demonstrates the ability to make debt payments

c. shows the volatility of cash flow in future


Explanation:
For the growth strategy, the capital structure decision is very important. The financial model shows the company's ability to take debt financing.
Financial models forecast the future cash flow of the business.
They also estimate the amount to cover the downside risk of fixed cost.

Not Apply:

shows impact to operating cash flow used to invest in future business

Operating cash flow is not used to invest in future business. Free cash flow is used.

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