Cah budgets Flashcards
Whta is a fixed cost
Cosst which do not chnage as output changes
What is a variable cost
Costs which vary as output chnages
What are the advanatges of a break even analysis
You cans ee at a glance how many units need to be sold before a profit starts to be made
can see how much profit or loss is being made at different levels of output
What are the disadvanatges of a break even analysis
Difficult to use if the business makes more than one product
it assumes thay all units produced are sold
What is a cash budget
A plan of finance for the future
it shows the expected cash flow of a business
a prediction of the cosh coming in and goig out fo the organisation
What si the purpose of a cash budget
Identify cash short falls to allow it to be resolved before it happens
idenitfy cash surplus to allow for ways of spending the cash to eb identifies
plan for the furture to know what to expect
identify a suitable time to purchase expensive items
What are examples of cash flow problems
Spending too much money on stock that has not been sold
gicing customers too long to pay their debts
sales decreasing
owners taking out too much stock or cash
perchasing equipment/ vehicle at the wrong time
What are cash flow solutions
Try to increase sales or increase selling
reduce credit givent o customers
find a cheaper supplier
do not purchase expensive items
What is the purpose of an income statement
to calculate the profit
What does an income statement show
Level of success in selling products/services
shows where expenses should be reduced
be used ot calculate tax to be paid to the governemnt
aid decision making
What are spreadsheets used for
Cna be used to prepare finnacial documents such as income statements and cash budgets
What are teh adavanatges of using spreadsheets
Formulae can be used to ensure calculations are performed accurately
grpahs can be geenrated so information can be interpreted more easily
templates can be created
What can databased be used for
Cna be used to store cutsomers banking information for invoicing
How is word processing used
Can type up an invoice to send to customers
ca prepare finnacial reports for shoing board of directors
How is an email used
Cna contact suppliers ot negotiate a better deal for cost of raw materials
contact customers to tell them payment is due
contact cutsomers to tell them payment has been received
