Break-even Point Sales at which total revenue earned equals total costs incurred (TR=TC). TR = Selling Price x Quantity TC = Fixed Cost + (Variable Cost/unit.

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Presentation transcript:

Break-even Point Sales at which total revenue earned equals total costs incurred (TR=TC). TR = Selling Price x Quantity TC = Fixed Cost + (Variable Cost/unit x Quantity) BEQ = FC/SP – VC Break even Analysis Margin of Safety What is the importance of BEP in a Business? What are the shortcomings of BEP Analysis ?

BEP - Example Fixed costs: - Marketing cost : Rs. 3 mn - Executive Salaries : Rs. 2 mn - Rent, Electricity : Rs. 1 mn - Office & Admin Exp : Rs. 2 mn Total Fixed cost : Rs. 8 mn Variable cost/ unit : - Mfg cost : Rs. 70/- - Labour cost : Rs. 30/- Selling Price / unit : Rs. 1,000/- BEQ = (8,000,000/1000) – 100 = 7,900 units

Cash Flow Management What is Cash Flow ? What are Sources and Uses of Cash in a business ? How important is Cash Flow Management in a business ? Relationship between Profit/Loss and Cash Flow

Working Capital What does working capital mean? Working capital = Current Assets – Current Liabilities What does + ve or – ve working capital indicate ? How much working capital is adequate for a business ?

Some important indicators of Working capital Working capital turnover: Sales / Working capital Current Ratio Current Assets / Current Liabilities Days Sales outstanding Receivables/ Annual Sales/ 365 days Inventory Turnover Ratio Cost of Goods sold/ Inventory