topic e Flashcards
(8 cards)
cash inflows
receipts entering the business
cash sales
credit sales
loans
capital introduced
sales of assets
bank interest received
cash forecasts
predicts money flowing in and our of a business to ensure its staying solvent
cash outflows
payements exiting the business
cash,credit purchases
utilites
external finances
assets purchases
vat
break even - test ans
plan - ensures profits
monitor - alerts potential problem
control - take action
set targets - allows growth recognisation
cashflow - test ans
montoring
control
planning
target setting
ways to improve cashflow
-encourage debtors to pay debts
-reduce unnecessary expenses
-sell debts to debt factors
-encourage suppliers to extendend credit
-sell assets
- budget
-target setting
contribution
contribtuion pays for the business fied overheads
- allows correct pricing against production costs
- may be low so in need of large quanititves
- may be expensive
- can be undervalue if distorted
exam break snalysis
Advantages
He will know how many customers he
needs to have/items he needs to sell to
break even
It can inform decisions about what price to
charge
He can use it to set targets for the
business and for any staff he may have
It allows him to identify his fixed and
variable costs
He can identify if costs are too high and
take action to lower them
It is a simple way of calculating profit and
loss at different levels of output
It allows for ‘what if’ scenarios
Identifies margin of safety so he knows
how many units sales can fall by without
making a loss
6
Disadvantages
Break-even theory only applies to one
product
Assumes all products made/bought can be
sold
Assumes that all products are bought/sold
at the same price
Assumes that fixed costs will stay fixed
regardless of output, which may not be the
case
Assumes that variable cost per unit stays
the same
It is only a prediction
Mark scheme (award up to 6 marks) refer to the guidan
