Value of Breakeven Analysis (AQA A-Level Business): Flashcards
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Breakeven analysis definition
Breakeven analysis definition
Financial tool showing when business becomes profitable
Breakeven benefit for new businesses
Breakeven benefit for new businesses
Shows sales needed to profit & tests if venture is viable
Breakeven benefit for loan applications
Breakeven benefit for loan applications
Proves financial planning to secure funding from lenders
Breakeven benefit: scenario modelling
Breakeven benefit: scenario modelling
Tests impact of price/cost changes before implementing
Limitation: fixed costs assumption
Limitation: fixed costs assumption
Fixed costs actually rise in steps, not constant
Limitation: pricing assumption
Limitation: pricing assumption
Assumes uniform price; ignores discounts & price variations
Price increase effect on breakeven
Price increase effect on breakeven
Revenue line rotates up, lower output needed
Price decrease effect on breakeven
Price decrease effect on breakeven
Revenue line rotates down, higher output needed
Fixed cost rise effect on breakeven
Fixed cost rise effect on breakeven
Cost lines shift up, higher output needed
Variable cost rise effect on breakeven
Variable cost rise effect on breakeven
Total cost line steeper, higher output needed