Revision for exam in Feb. Flashcards
(19 cards)
What is break even?
Break even point, is when the making of the products the same price as when it’s sold. At break even point, a business has not made a profit or loss.
How do you calculate break even?
Fixed cost divided by the selling price - variable cost per unit.
What is the margin of safety?
The margin of safety is the difference between the target and actual sales and the break-even point.
What is target sales?
Target sales is the amount of units a business aims to sell.
What does a break-even chart show?
They show when a business will make a loss and a profit. It also shows the total revenue, total costs, fixed costs and the margin of safety.
What is the break-even point?
It’s where the total revenue and total costs lines cross.
When the outflows are higher than the inflows is it good or bad?
When the outflows are higher than the inflows it is bad. It means the business is at risk of being in debt or it already is.
When the inflows are higher than the outflows is it good or bad?
When the inflows are higher than the outflows it’s bad.
What is a cash flow forecast?
A cash flow forecast is what identifies all the money that will be coming in (inflows) and going out (outflows) of a business over a period of time.
What do a cash flow forecast predict?
It predicts whether or not a business will be able to pay all of its debts.
When shall a cash flow forecast be updated?
if they’re any unpredicted cash coming in (inflows) or out (outflows) of a business. This is so a business can predict any problems.
What is a cash inflow?
A cash inflow includes all the money that a business includes.
What is inflow examples?
- sales of products
- interest on savings
- sales of assets, such as old products
- borrowed money, such as loans
What is net cash flow?
The difference between cash flowing in and out of the business.
What is cash inflows/receipts?
How much cash is coming into the business from product sales, sales of assets, loans from bank, grants from government and other sources of finance.
What is opening balance?
How much cash a business has at the start of a time period - day, week, month.
What is cash outflows/payments?
How much cash is going out of business, such as expenses, wages, raw materials, buying new machinery, tax payments and dividend.
What is closing balance?
How much money is left at end of that period - day, week, month.
What is favourable variance?
A difference between an actual cost and a budgeted or standard cost, and the actual cost is the lesser amount. In the case of revenues, a favourable variance occurs when the actual revenues are greater than the budgeted or standard revenues.
