Financial Management & Budgeting Flashcards

What is a break-even point in financial analysis?

Answer: The point where total revenue equals total costs

The break-even point is where total revenues equal total costs, meaning the business neither makes a profit nor incurs a loss.

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

Answer: Money owed to the company by customers

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

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

Answer: Monthly office lease payment

Fixed costs remain constant regardless of production or sales volume, such as rent, insurance premiums, and salaried staff wages.

What is depreciation in accounting?

Answer: The gradual allocation of an asset's cost over its useful life

Depreciation systematically reduces the book value of a long-term asset over its useful life, reflecting its consumption and wear over time.

What does the P&L statement stand for?

Answer: Profit & Loss

The Profit & Loss (P&L) statement, also known as the income statement, summarizes revenues, costs, and expenses to determine net income or loss.

Cost-benefit analysis is primarily used to:

Answer: Evaluate whether the benefits of a decision outweigh its costs

Cost-benefit analysis compares the expected benefits of an action or investment against its associated costs to support sound financial decision-making.