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Breakeven Analysis
Written by: Start Your BusinessArticle Overview: Breakeven analysis is a tool used to determine when a business will be able to cover all its expenses and begin to make a profit. For the startup business, it is extremely important to know your startup costs, which provide you with the information you need to generate enough sales revenue to pay the ongoing expenses related to running your business.
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Breakeven Analysis
Breakeven Analysis
Breakeven analysis is a tool used to determine when a business will be able to cover all its expenses and begin to make a profit. For the startup business, it is extremely important to know your startup costs, which provide you with the information you need to generate enough sales revenue to pay the ongoing expenses related to running your business.
A startup business owner must understand that $5,000 of product sales will not cover $5,000 in monthly overhead expenses. The cost of selling $5,000 in retail goods could easily be $3,000 at the wholesale price, so the $5,000 in sales revenue only provides $2,000 in gross profit. The breakeven point is reached when revenue equals all business costs.
To calculate your breakeven point, you will need to identify your fixed and variable costs. Fixed costs are expenses that do not vary with sales volume, such as rent and administrative salaries. These expenses must be paid regardless of sales, and are often referred to as overhead costs. Variable costs fluctuate directly with sales volume, such as purchasing inventory, shipping, and manufacturing a product. The formula for determining your breakeven point requires no more than simple arithmetic.
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Large mergers, acquisitions and some other corporate combinations require prior review and approval in some jurisdictions. As part of their review, competition authorities may prohibit mergers or approve them subject to conditions. Mergers are usually only prohibited or subjected to conditions if the authority concludes that the merger will substantially harm competition. Given the discretion inherent in the interpretation of this threshold, various competition authorities have published merger guidelines. These are intended to assist firms and their advisers to anticipate the procedures and criteria, which will be applied in assessing a merger.
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