Break- Even Analysis

Purpose of Break-even Analysis

Using a Break Even Analysis is a powerful tool to help you determine what sales volume you need to reach before you start making a profit. At the Break Even point, you either lose or make money. If you sell more, you earn a profit; if you sell less, you lose money. A Break Even analysis analyzes the relationships between your variable costs, fixed costs, and revenues, relative to your sales volume. Doing so enables you to set profitable pricing, determine optimum production, and evaluate different strategic options. It’s also an important part of assessing your Cash Flow.

Due Diligence

Due diligence is a program of critical analysis that companies undertake prior to making business decisions in such areas as corporate mergers/acquisitions or major product purchases/sales. The due diligence process, whether outsourced or executed in-house, is in essence an attempt to provide business owners and managers with reliable and complete background information on proposed business deals so that they can make informed decisions about whether to go forward with the business action.

Many companies undertake the due diligence process with insufficient vigor. In some cases, the prevailing culture views it as a perfunctory exercise to be checked off quickly. In other instances, the outcome of the due diligence process may be tainted (either consciously or unconsciously) by owners, managers, and researchers who stand to benefit personally or professionally from the proposed activity. Businesses should be vigilant against letting such casual or flawed attitudes impact their own processes: an efficient due diligence process can save companies from making costly mistakes that may have profound consequences for the firm's other operational areas and/or its corporate reputation.

Break-even Analysis

Almond & Mocha Break-even Analysis is based on the average of the first-year figures for total sales by units, and by operating expenses. These are...