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Break even analysis

In Break even analysis, the Break even Point is, in general, the point at which the gains equal the losses, where sales or revenues equal expenses. A break even point defines when an investment will generate a positive return.

Or also the point where total costs equal total revenues. There is no profit made or loss incurred at the break-even point. This is important for anyone that manages a business, since the break even point is the lower limit of profit when prices are set and margins are determined.

Achieving Break-even today does not return the losses occurred in the past. Also it does not build up a reserve for future losses. And finally it does not provide a return on your investment (the reward for exposure to risk). This is the relationship between cost volume and profits at various levels of activity, with emphasis being placed on the break even point. The break even point is when total money received from sales is equal to total money spent to produce the items for sale.

It's a cheap screening device. Discounted cash flow techniques require large amounts of expensive-to-get data. Break even analysis can tell you whether or not it's worthwhile to do more intensive (costly) analysis.

The Break even analysis can be applied to a product, an investment, or the entire company's operations and is also used in the options world.


In options, the Break even Point is the market price that a stock must reach for option buyers to avoid a loss if they exercise. For a Call, it is the strike price plus the premium paid. For a Put, it is the strike price minus the premium paid.

Break even point

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Break even formulas can be changed a little to show profits or losses. Calculation of the Break Even Point (BEP) can be done using the following formula:
BEP = TFC / (SUP - VCUP)

where:
  1. BEP = break even point (units of production)
  2. TFC = total fixed costs,
  3. VCUP = variable costs per unit of production,
  4. SUP = selling price per unit of production.

Fixed cost and variable costs

Break even analysis is a useful tool to study the relationship between fixed cost and variable costs and returns. The Break even Point defines when an investment will generate a positive return. It can be viewed graphically or with simple mathematics. Break even analysis calculates the volume of production at a given price necessary to cover all costs. Break-even price analysis calculates the price necessary at a given level of production to cover all costs. To explain how Break even analysis works, it is necessary to define the cost items.

Fixed costs, which are incurred after the decision to enter into a business activity is made, are not directly related to the level of production. Fixed costs include, but are not limited to, depreciation on equipment, interest costs, taxes and general overhead expenses. Total fixed costs are the sum of the fixed costs.

Variable costs change in direct relation to volume of output. They may include cost of goods sold or production expenses, such as labor and electricity costs, feed, fuel, veterinary, irrigation and other expenses directly related to the production of a commodity or investment in a capital asset. Total variable costs (TVC) are the sum of the variable costs for the specified level of production or output. Average variable costs are the variable costs per unit of output or of TVC divided by units of output.

The Break even Point analysis must not be mistaken for the Payback Period, the time it takes to recover an investment.

In Value Based Management terms, a break even point should be defined as the Operating Profit margin level at which the business / investment is earning exactly the minimum acceptable Rate of Return, that is, its total cost of capital.

Business strategies definition

 

Business strategy development

  1. Idea generation
    1. Opportunity analysis
      The strategy of assessing the potential for a change or enhancement to enhance the generation of revenue.
  2. Idea screening
  3. Business analysis
    1. Break even analysis
    2. Benefits of break even analysis
    3. Fourt Woodlock equation
      The tool used to determine whether the product idea will be profitable or not.
  4. Critical path analysis
  5. How to make critical path analysis?
  6. Critical path in business
  7. Logistics strategic plan
    Logistics is how to get raw materials, move them in the system, distribute and replace them.
 
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Image relevancy is important when it comes to image optimization for SEO. An image of a train on a page related to Ferrari will do you no good. I know its common sense but this step is so important that I just can't miss it out.

Our focus has shifted from Social Media to VISUAL Social Media. This is a shift from Tell to Show. We are drawn to "visual content" online in more ways than ever before. The opportunity this provides for business is massive.

In short, it means that businesses or brands online need to take note of the stats. In 2012 alone we have seen You Tube pass 4 Billion Daily Video Views and Pinterest become the 4th largest driver of traffic worldwide. UPDATE: In fact, Pinterest, has just recently become the 2nd largest driver of traffic worldwide.

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For business, this means a massive opportunity for businesses who can leverage the power of visual marketing. If we can learn how to use images, photos, video, and other visual media in our online marketing, then we have a greater chance of reaching more people with our message. This then provides the opportunity for more exposure as visuals drive traffic to our websites products and services.

People are drawn to visual content and take action based on its subtle cues faster than any other medium–faster than text, audio or video.

The power of pictures isn't restricted to image-centric platforms like Pinterest and Instagram. Visuals are attracting attention and driving engagement across all social networks. Vkontakte - being the Russian Facebook - is no exception.

Post your photos in VK and then use the Vkontakte image SEO tool - Get Free Followers to boost likes on your VK images.

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