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Exam 6: Analyzing Cash Flow and Other Financial Information

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Question 51

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In the context of financial tools, identify a difference between how traditional Fortune 500 firms and entrepreneurial ventures approach break-even analysis.

A) Traditional Fortune 500 firms calculate breakeven using profit, whereas entrepreneurial ventures calculate breakeven using cash flow.
B) Traditional Fortune 500 firms estimate breakeven based on gross profits, whereas entrepreneurial ventures estimate breakeven using net profits.
C) Traditional Fortune 500 firms calculate breakeven from returns on initial investments, whereas entrepreneurial ventures calculate breakeven from the profit margin from each sale.
D) Traditional Fortune 500 firms estimate breakeven as the point where costs equal sales, whereas entrepreneurial ventures estimate breakeven as the point where cash flow becomes positive.

E) A) and B)
F) B) and D)

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Question 52

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Why is a break-even analysis important to a new business?

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A break-even analysis is important to a ...

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Question 53

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A deviation analysis is a review of the differences between the predicted and the actual performance of cash flows.

For a new business owner, what are the benefits of using a deviation analysis?

An income statement provides both the ________ and the ________ profit figures for a firm.

A ________ is an analysis by a small business owner of the best-case and the worst-case financial scenarios.

In the context of cash flow analysis, ________ are a useful measure as a means to evaluate performance when there is a separation between managers and owners.

If a small firm is making a profit, then the firm must have a positive cash flow.

How is an income statement used by a new business?

A firm obtains profits when its sales revenue is higher than its expenses.

An investment into a small business by owners is called ________.

In the context of financial tools, when a new venture's net cash flow exceeds the initial investment plus the time value of the money invested, the venture is said to have achieved ________.

Fixed assets are assets that have a physical presence, such as buildings and office equipment.