Analyse financial data and assess business risks
B1 Cash flow forecasts and statements
Methods and processes used to prepare, complete, revise and analyse cash flow forecasts and statements of cash flow.
- The importance of cash flow.
- Inflows/receipts and outflows/payments.
- The difference between a cash flow forecast and a statement of cash flow.
- Analysis of cash flow forecasts and statements.
- Actions that can be taken by a business to address cash flow difficulties.
- Benefits and limitations of cash flow forecasts.
B2 Break-even analysis
Methods and processes used to prepare, complete, revise and analyse a break-even chart.
- Distinguishing between types of cost: fixed, variable, semi-variable.
- Sales: calculations of total revenue from output and sales per unit.
- Constructing a break-even chart from given data to determine the break-even point and the margin of safety.
- Calculating the margin of safety and the break-even point using the break-even formula (units and/or sales value).
- Calculation of total contribution, contribution per unit benefits and limitations.
- The implications of contribution analysis for short-term decision making.
- Benefits and limitations of break-even analysis.
B3 Business risks
Assessment of financial risks using cash flow and break-even analysis.
- Risks related to costs (fixed costs, variable costs, semi-variable, total costs), including changes in suppliers, changes in the cost of imported materials, factors impacting labour costs.
- Risks related to cash inflows and revenue streams (changes in market conditions, overambitious forecasts, changes in economic conditions including interest rates).
