COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Sales may not be as high as expected
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Customers pay too little for products
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Sales may be high than expected
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Competitors increase promotion
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Detailed explanation-1: -The main causes of cash flow problems are: Low profits or (worse) losses. Over-investment in capacity. Too much stock.
Detailed explanation-2: -Many businesses end up in a cash flow crunch due to unexpected expenses (for example, costly repairs to equipment, replacing malfunctioning technology or a natural disaster) or too much money going out each month (such as ongoing expenses that have quietly crept up to an unsustainable level).
Detailed explanation-3: -A cash flow problem is when the cash going out of the business outweighs the cash coming in, causing a lack of liquidity meaning a company will struggle to make payments to suppliers, pay bills and ultimately running the business effectively.
Detailed explanation-4: -It creates the potential for greater profit, but requires more cash to finance the larger volumes. When sales grow, the impact on the balance sheet is considerable, specifically when you look at inventory and accounts receivable. These trading asset accounts are essential to the business operating cycle.