DOES ANYONE KNOW anything about Break Even in a business???

Question

How does the Break Even help managers?
what are some of the Draw backs?
How important is Break Even?
How is Break Even used a decison making tool?

i wish to start a business, but i need info on the above

Answer 1

in very simple terms, it is the amount of profit you have to make to cover your fixed expenses. for example, if you are renting a retail location and paying utilities for it, those are considered "fixed expenses" because the amount of the expense doesn't change due to high or low levels of business. if your monthly rent and utilities are $1000 and you buy stuff for $3000 and sell it for $4500 you are making a gross profit of $1500. from that you have to pay the $1000, leaving you with $500 profit. to break-even you need to make $1000 gross profit, because you will use it to pay the fixed expenses. you "break-even" because you have neither a profit or a loss. it's very important to identify your fixed costs in your business plan so you will know how much gross profit and daily sales will be required.

Answer 2

Break even what? B/E revenues, B/E gross profit, B/E units, B/E debt service coverage ratio...

Break even basically shows you the minimum you need to do to be able to pay all your expenses. For startup business, it can serve as a great reality. If you are entering into a business that typically has high running costs, then your break even revenues for example, might be too high for a new business to achieve within the first year of operations.

But you have to be careful when using B/E analysis since it is predicated on several assumptions. Your fixed costs will remain constant but your variable costs are subject to change as the economic environment changes. Also, B/E analysis, assumes a certain level of consistency which may not work if you are in a cyclical industry. So you may have to have a B/E nalaysis for low season and one for high season.

Answer 3

u can find more answer at www.bplan.com