Break even point
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Break-even Point. Sales at which total revenue earned equals total costs incurred (TR=TC). TR = Selling Price x Quantity TC = Fixed Cost + (Variable Cost/unit x Quantity) BEQ = FC/SP – VC Break even Analysis Margin of Safety What is the importance of BEP in a Business?

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Break-even Point

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Break even point

Break-even Point

  • Sales at which total revenue earned equals total costs incurred (TR=TC).

  • TR = Selling Price x Quantity

  • TC = Fixed Cost + (Variable Cost/unit x Quantity)

  • BEQ = FC/SP – VC

    Break even Analysis

  • Margin of Safety

    What is the importance of BEP in a Business?

    What are the shortcomings of BEP Analysis ?


Bep example

BEP - Example

  • Fixed costs:

    - Marketing cost : Rs. 3 mn

    - Executive Salaries : Rs. 2 mn

    - Rent, Electricity : Rs. 1 mn

    - Office & Admin Exp : Rs. 2 mn

    Total Fixed cost : Rs. 8 mn

  • Variable cost/ unit :

    - Mfg cost : Rs. 70/-

    - Labour cost : Rs. 30/-

  • Selling Price / unit : Rs. 1,000/-

  • BEQ = (8,000,000/1000) – 100 = 7,900 units


Cash flow management

Cash Flow Management

  • What is Cash Flow ?

  • What are Sources and Uses of Cash in a business ?

  • How important is Cash Flow Management in a business ?

  • Relationship between Profit/Loss and Cash Flow


Working capital

Working Capital

  • What does working capital mean?

    Working capital = Current Assets – Current Liabilities

  • What does + ve or – ve working capital indicate ?

  • How much working capital is adequate for a business ?


Some important indicators of working capital

Some important indicators of Working capital

  • Working capital turnover:

    Sales / Working capital

  • Current Ratio

    Current Assets / Current Liabilities

  • Days Sales outstanding

    Receivables/ Annual Sales/ 365 days

  • Inventory Turnover Ratio

    Cost of Goods sold/ Inventory


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