Cash breakeven analysis
A) is helpful in analyzing the short-term outlook of the firm, particularly when it is in trouble financially.
B) is important when analyzing long-term profitability.
C) includes depreciation expense as a fixed cost when calculating the degree of financial leverage.
D) None of these.

Question

Quizplus · Accepted Answer

Cash breakeven analysis is most useful in analyzing the short-term outlook of the firm, particularly when it is in financial trouble. This analysis helps determine the level of sales needed to cover all variable and fixed costs with no profit or loss. It excludes non-cash expenses, like depreciation, and focuses on the firm's ability to generate enough cash to cover expenses.

Cash Breakeven Analysis