CBP Business Finance and Accounting Flashcards

What is the purpose of a cash flow statement?

Answer: To track the inflow and outflow of cash over a period

A cash flow statement tracks all cash inflows and outflows from operating, investing, and financing activities over a reporting period.

Which of the following is an example of a fixed cost?

Answer: Monthly office rent

Fixed costs like rent remain constant regardless of production volume, unlike variable costs that change with output levels.

What is the difference between revenue and profit?

Answer: Revenue is total income; profit is what remains after expenses

Revenue is the total income generated before any deductions, while profit is the remainder after all costs and expenses have been subtracted from revenue.

A business spends $10,000 on marketing and generates $40,000 in new sales from that campaign. What is the ROI?

Answer: 300%

ROI = (Net Profit / Cost) × 100 = ($40,000 - $10,000) / $10,000 × 100 = 300%, meaning every dollar spent returned three dollars in profit.

What does 'accounts receivable' represent on a company's balance sheet?

Answer: Money owed to the company by customers for goods or services delivered

Accounts receivable is a current asset representing amounts customers owe the company for products or services already delivered but not yet paid for.

Which financial metric measures how efficiently a company uses its assets to generate profit?

Answer: Return on Assets (ROA)

Return on Assets (ROA) is calculated by dividing net income by total assets, indicating how effectively management uses assets to generate earnings.