What Is One of the Big Assumptions One Makes When

question 13

Multiple Choice

What is one of the big assumptions one makes when projecting revenue for the venture concept?

• A) Assuming those who make an initial purchase will continue to be repeat purchasers
• B) Assuming customers currently satisfied with existing alternatives will switch to your offering
• C) Assuming those who make an initial purchase will not continue to be repeat purchasers
• D) None of the above

Interpret various types of cost behavior and its implications on cost-volume-profit analysis.

Calculate operating income under different sales scenarios.

Understand and apply the concepts of margin of safety and operating leverage in financial decision making.

Evaluate the impact of changes in cost structure and sales on a company's financial performance.

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Definitions:

Cash Flow

The net amount of cash being transferred into and out of a business, especially in terms of operational, investing, and financing activities.

Operating Activities

Activities directly connected to the primary revenue-producing operations of a company, reported in the statement of cash flows.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value of the asset as it is used.

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash from operating activities.