Managment Accounting Flashcards
Distinguish between cash-flow and profit
profit indicates the amount of money left over after all expenses have been paid, cash flow indicates the net flow of cash into and out of a business.
How to calculate free cash flow?
Net income + depreciation - change in working capital
Impact of costs and revenue on cash flow
High costs- more money going out of the business than in results in business unable to pay it’s costs efficiently.
High revenue- more money going into the business than out meaning it can pay its cost easier and have profit to use afterwards.
Strategies to overcome forecast cash-flow problems
Leasing assets, finding a cheaper supplier, staff redundancy, offer discounts for early/on time payments
How to calculate cash flow statements
Cash from operating activities +(-) Cash from investing activities +(-) Cash from financing activities + Beginning cash balance.
How to calculate cash flow statements
Free Cash Flow = Net income + Depreciation/Amortization – Change in Working Capital – Capital Expenditure.
Impacts of a cash flow statement
Verifies the current profitability and liquidity situation of the business, shows the cash management,shows the costs of the business accurately against revenue
How to calculate average costs
Average total cost = (total fixed costs + total variable costs) / number of units produced
How to calculate average revenue
taking the total amount of revenue and dividing it by the number of units or users during a specific time period
How to calculate price
Determine total cost of units purchased, divide by the numbers of units purchased,then use Selling Price = Cost Price + Profit Margin
What’s the importance of direct, indirect and overhead costs to a business
Direct-Direct costs can help you make important pricing decisions
Indirect- necessary for the general operation of the organization and the conduct of activities it performs
Overhead-determining how much a company must charge for its products or services in order to generate a profit
Difference between cost and profit centres
Cost centres are responsible for the costs of he organisation while profit centres is responsible for both the profit and its costs.
What is contribution
The amount left over after the direct costs are subtracted from the revenue
What is the margin of safety
the difference between actual sales and break-even sales.
Where is the break even on a break even chart
Where the total costs and revenue interject
