1 / 5

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?

Download Presentation

Break-even Point

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. 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 ?

  2. 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

  3. 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

  4. 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 ?

  5. 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

More Related