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) includes the amount of liabilities.

Question

Quizplus · Accepted Answer

Cash break-even analysis is used to determine the level of sales required to cover all of a firm's cash expenses, including fixed and variable costs. It is particularly helpful in analyzing the short-term outlook of a firm, especially when the firm is facing financial difficulties. It helps the firm determine how many sales are necessary to cover expenses and avoid losses.

Cash Break-Even Analysis