Cash break-even 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 amortization expense as a fixed cost when calculating the degree of financial leverage.
D) none of the other answers are correct

Question

Quizplus · Accepted Answer

Cash break-even analysis is useful for determining the point at which a company generates enough revenue to cover its cash expenses. This is particularly important in assessing the short-term outlook of the firm, especially when it is facing financial difficulties. Option B is incorrect as long-term profitability is analyzed through different tools. Option C is also incorrect as amortization is a non-cash expense and it's not included in the calculation of the degree of financial leverage.

Cash Break-Even Analysis