Final answer:
Adding back increases in accounts receivable is not an adjustment made in a cash break-even analysis, which is focused on cash transactions; rather, non-cash expenses such as depreciation and amortization are typically adjusted for in this type of analysis.
Step-by-step explanation:
The student asked whether adding back increases in accounts receivable is an example of an adjustment for a cash break-even analysis. The answer to this question is False.
In a cash break-even analysis, the focus is on the cash transactions and cash flow within a business.
Therefore, changes in accounts receivable, which are amounts owed by customers that have not yet been paid, would not be added back as they do not affect the company’s immediate cash position.
Instead, a cash break-even analysis typically includes adjustments for non-cash expenses such as depreciation and amortization, since these expenses reduce net income but do not directly impact cash flow.
When calculating cash break-even, the analyst wants to know when cash inflows will cover cash outflows and non-cash adjustments are generally reversed out to get a clear view of the cash-only situation.