Which of the following is NOT a correct statement regarding break-even?
A) Accounting break-even is the sales level that results in zero project net income.
B) The cash break-even is the sales level that results in zero OCF.
C) The financial break-even is the sales level that results in zero NPV.
D) If there is depreciation the cash break-even will exceed the accounting break-even.
E) Of the three break-evens, the financial break-even point is typically the highest.

Question

Quizplus · Accepted Answer

The cash break-even point is lower than the accounting break-even point because depreciation, a non-cash expense, is subtracted in the calculation of net income but not in the calculation of operating cash flow (OCF). This means that the presence of depreciation would actually make the cash break-even point lower than the accounting break-even point, not higher.

Which of the Following Is NOT a Correct Statement Regarding