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The break-even cash flow model calculates three key measures of an investments attractiveness cash flow, operating profit, and breakeven sale level. Cash flow is particularly important, a negative value means that investors must provide more money just to the business operating. Operating profit (based on accrual accounting) determines the return on the initial investment. Cash flow and operating profit provide two different measures of a business health. Cash flow is cash receipts minus cash outlays, operating profit is defined in accrual accounting as revenues minus expenses. A business with positive cash flow and operating profit is in good shape. Cash break-even analysis dose not fully represent cash flow for this a cash budget is required. But cash break-even is useful because it provides a picture of the flow of funds from operations.
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