Cash Flow Forecast and Break Even Flashcards
Cash flow forecast
e cash flow forecast predicts the net cash flows of the business over a future period.
Uses of cash flow forecast
Planning, monitoring, control and target setting.
Fixed Cost
These are incurred by the business regardless of how well it is doing.
Variable Costs
These increase when the business increases its activity or output, e.g raw materials.
Semi Variable Costs
These are a combination of fixed costs and costs which become variable once a certain level of activity or output is reached.
Selling price per unit
Amount paid by each customer for each item bought
Sales in units
Quantity of sales.
Sales in value
Monetary value of sales
Total Revenue Formula
Quantity of goods sold x Selling price per unit
Break-even Point
Total Revenue = Total Costs
Total Costs
Fixed Costs + Variable Costs
Contribution per unit
Selling price - Variable costs per unit
Total Contribution
Contribution per unit x Number of units sold
Break- even point
Fixed Costs/Contribution per unit
Margin of safety
Sales - Break even level of output
