Cash flows are not affected by the basis of accounting used to prepare the financial statements. Accordingly, whether the financial statements are prepared based on the tax basis, the cash basis, or accounting principles generally accepted in a given country, cash flows should be the same. For example, the cash inflow or outflow resulting from using an accelerated depreciation method to determine actual tax expense or benefit the amount paid to or refunded by the taxing authority) is completely unaffected by the depreciation method used in the financial statements. However. if cash flows are derived indirectly by adjusting profit or loss reported in the financial statements, different adjustments are necessary to arrive at the same cash flow amounts if different bases of accounting are used in the preparation of the financial statements.

Business process reengineering BPR), or business process analysis, involves process innovation and process redesign. Instead of improving existing procedures, it finds new ways of doing things. One major drawback of BPR is that employees may be resistant due to fear of layoffs, being replaced, or insecurity about new required skills or tasks that the employee now has to perform.

Prevention costs are incurred to prevent defects. Examples are the costs of employee training, review of equipment design, preventive maintenance, and evaluation of suppliers. Accordingly, the prevention costs equal US $701,000 ($275,000 design reviews + $180,000 process engineering + $90,000 scheduled maintenance + $156,000 training).

In business terminology, a high degree of operating leverage, other things held constant, means that a relatively small change in sales will result in a large change in operating income. Therefore, if a high percentage of an entity's total cost is fixed, the entity is said to have a high degree of operating leverage.