Term Paper on Break-Even Analysis
Analysis Term Paper:
Break-even analysis is a process of calculation of the amount of business operations that are required to equalize the levels of a company’s revenue and cost indicators. It is natural that every company requires investment in order to produce its goods and services.
Consequently, a company has the definite cost of production, because production of every item consumes raw stuff, electricity, energy, expenditures on its storage and logistics. When a company sells its products, it receives money that can be used for further production. Obviously, it is important to calculate how many products should be manufactured in order to cover their cost of production.
This calculation is called break-even analysis. A break-even point is the very border that shows that a company does not lose or earn anything. The every following sold item will bring profit to a company, while the reduction of sale will cause decrease of its revenue.
Break-even analysis is very important to investors, because they should know how much money they have to invest into a firm in order to receive solid profit. If the cost of production is practically the same as an item’s price, one will not wait success from such business operations. Break-even analysis demonstrates a company’s productiveness and success at the definite moment. For example, if a company sells products the number of which is higher than its break-even point indicator, it receives solid revenue this season. On the contrary, if the rates of sale are lower than the break-even point indicator, a company will lose its revenue. Evidently, break-even analysis is one of the most important elements of a business plan and every entrepreneur should calculate this point accurately if he wants to plan his business professionally.
Break-even analysis is a good subject for research if you want to learn how to compose your detailed business plan correctly. When you write a term paper about break-even point, you should explain its meaning and write about its relevance and importance for business. It is wise to provide readers with the right algorithm of break-even point calculation and describe all elements of this formula in detail.
Furthermore, one should provide his teacher with a few examples of break-even analysis conducted by several famous companies.
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