Financial Management & Budgeting Flashcards
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Read the first 7 Financial Management & Budgeting flashcards as text
What is the primary purpose of a capital budget?
Answer: To plan for long-term asset acquisitions and investments
A capital budget focuses on planning major long-term investments such as equipment, facilities, and infrastructure rather than day-to-day expenses.
Which financial document shows a company's assets, liabilities, and equity at a specific point in time?
Answer: Balance sheet
A balance sheet provides a snapshot of a company's financial position—assets, liabilities, and equity—at a specific date.
What does 'accounts payable' represent on a company's balance sheet?
Answer: Money the company owes to vendors and suppliers
Accounts payable represents amounts the company owes to external parties such as vendors and suppliers for goods or services received.
At the break-even point, a business has:
Answer: Total revenues equal to total costs
The break-even point is where total revenue exactly equals total costs, meaning the business neither profits nor incurs a loss.
Zero-based budgeting (ZBB) requires organizations to:
Answer: Justify every expense from scratch each budget cycle
Zero-based budgeting starts from zero each period, requiring justification for every line item rather than adjusting prior-year figures.
What is the primary purpose of a cash flow statement?
Answer: To track the movement of cash in and out of the business
The cash flow statement tracks how cash moves into and out of the business across operating, investing, and financing activities.
Return on Investment (ROI) is calculated as:
Answer: Net profit divided by cost of investment, multiplied by 100
ROI measures the gain or loss from an investment relative to its cost: (Net Profit / Cost of Investment) × 100.
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