BTEC Business Unit 3 LO:E Break even and cash flow

Which of the following is an example of an inflow in a cash flow forecast?

• Rent

• Cash purchases

• Loan received

• Wages paid

In a cash flow forecast, which of the following would be classified as an outflow?

• Bank interest received

• Credit sales

• Utilities

• Sale of assets

What is the main purpose of preparing a cash flow forecast for a business?

• To calculate profit

• To manage future cash needs and ensure liquidity

• To estimate the sales volume

• To calculate fixed costs

Which of the following is a benefit of cash flow forecasts?

• It guarantees future profits.

• It helps identify cash shortages before they occur.

• It eliminates the need for external financing.

• It ensures the business will not face financial difficulties.

What is the limitation of using a cash flow forecast?

• It predicts exact future profits.

• It does not account for unexpected events or changes in the market.

• It provides precise details of monthly expenses.

• It requires no adjustments during the period.

In break-even analysis, which of the following is considered a fixed cost?

• Raw materials

• Wages of hourly workers

• Rent

• Electricity

What does the break-even point represent in a business?

• The point where total revenue equals total costs.

• The point where profit is maximized.

• The point where the business starts making a profit.

• The point where total costs are at their highest.

Which of the following would increase the break-even point?

• Reducing variable costs

• Increasing the selling price per unit

• Reducing fixed costs

• Increasing fixed costs

What does the margin of safety refer to in break-even analysis?

• The amount by which sales can drop before a business starts making a loss.

• The level of sales required to reach the break-even point.

• The maximum possible sales before a business becomes overextended.

• The difference between fixed and variable costs.

If a business has a break-even point of 500 units and expects to sell 600 units, what is the margin of safety in units?

• 100 units

• 500 units

• 600 units

• 0 units