LAE cashflow

Question 1

what are the three solutions to cash flow problems ?

Answer 1

overdraft arrangement
negotiating terms with creditors
reviewing and rescheduling capital expenditure

Question 2

what is overdraft arrangements?

Answer 2

banks offer free overdraft facility if the business shows fluctuating forecast

Question 3

what is negotiating terms with creditors?

Answer 3

negotiate longer payments with suppliers eg 30days to 60 days

Question 4

what is reviewing and rescheduling capital expenditure?

Answer 4

manager will help to find area to cut or postpone expenditiure

Question 5

what is the benefit of cash flow?

Answer 5

encourages planning for cash inflows and outflows

identifies earliest of the negative closing balance

Question 6

what are the limitations?

Answer 6

can be inaccurate
I can’t plan for unexpected events
time spent on the cash flow forecast can be used on something else

Question 7

how to calculate break even ?

Answer 7

break even point = fixed costs / contribution per unit

Question 8

how to calculate contribution per unit ?

Answer 8

selling price- variable cost per unit

Question 9

how to calculate total contribution ?

Answer 9

sales revenue- total variable costs

Question 10

how to calculate total variable cost?

Answer 10

variable cost per unit x quantity

Question 11

how to calculate margin of safety?

Answer 11

actual sales - break even level of output