chapter 8

Question 1

break even point

Answer 1

the point at which income from sales will cover all enterprises costs

Question 2

cash flow forecast

Answer 2

to help predict the cash flows in and out the enterprise to predict in its short term financial future
does not predict profit

Question 3

why do enterprises have a cash flow forecast

Answer 3

to identify if the enterprise will have a surplus of deficit of cash so that it can be resolved
to help plan for the future
to set budgets for individual departments
to create targets for the staff.

Question 4

cash inflow

Answer 4

any cash that comes into the enterprise

Question 5

cash outflow

Answer 5

any chase that comes out the enterprise

Question 6

surplus

Answer 6

on a cash flow forecast if the cash that comes into the enterprise is greater than the cash that goes out, there is a surplus of cash

Question 7

deficit

Answer 7

on a cash flow forecast if the cash that comes into the enterprise is less than the cash that goes out, then there is a deficit of cash

Question 8

profit

Answer 8

when the total income of the enterprise is greater than the total expenditure of the enterprise

Question 9

calculation for break even

Answer 9

fixed costs ÷ (sales per unit- variable costs per unit)

Question 10

loss

Answer 10

when the total income of the enterprise is less than the total expenditure of the enterprise

Question 11

total costs equation

Answer 11

fixed costs + variable costs

Question 12

contribution

Answer 12

contribution per unit =
variable costs per unit -sale price unit

Question 13

fixed costs

Answer 13

costs that stay the same despite changes in the activity of the enterprise

Question 14

costs

Answer 14

cash that an enterprise spends to produce its goods or services

Question 15

variable costs

Answer 15

costs that increase and decrease with the activity of the enterprise

Question 16

profit or loss calculation

Answer 16

revenue - expenditure

Question 17

income statement

Answer 17

a record of finances of an enterprise over a specific period of time.
produced annually

Question 18

expenditure

Answer 18

money that goes out an enterprise

Question 19

why is an income statement useful

Answer 19

gives the owners/shareholders of the enterprise a clear understanding of how much profit of loss has been made
allows owners to make judgements abt how well the enterprise is forming
it allows lender to make judgement if the enterprise is making enough money to pay back a loan
it meets legal obligations to report your financials to the gov.
suppliers would want to know if the business is profitable

Question 20

cost of sales

Answer 20

the costs that are directly linked to generating sales, shuch as raw materials and the labour of those directly involved in the production

Question 21

gross profit

Answer 21

revenue minus cost of sales

Question 22

net profit

Answer 22

gross profit minus all other expenditures of the enterprise that are not directly linked to generating sales

Question 23

overheads

Answer 23

net profit minus all other expenditures