E- Break-even and cash flow forecasts Flashcards
Cash flow forecast
a document that shows the predicted flow of cash into and out of a business over a given period of time, normally 12 months.
Opening balance
amount of cash available in a business at the start of a set time period, e.g. a month.
Closing balance
amount of cash available in a business at the end of a set time period, e.g. a month.
Credit period
the length of time given to customers to pay for goods/services received.
Liquidity
measures a firm’s ability to meet short-term cash payments.
Insolvent
when a firm is unable to meet short-term cash payments
Break-even
the point at which a business is not making a profit or loss.
Break even Formula
Fixed costs/contribution per unit
Contribution
selling price – variable costs
Fixed costs
costs which do not vary with output
Variable costs
costs which vary with the level of output
Semi-variable costs
part of the cost stays the same and part varies with output. E.g. telephone charge – the landline cost is fixed but the charge for calls will vary with the number of calls made.
Total costs
fixed and variable costs.
Total revenue
the total amount of money coming in from sales = quantity sold x selling price
Total sales
the amount of sales made in a set time period, e.g. a year.
