Discuss the various uses for break-even analysis

             A new business must know what gross sales volume level it must achieve
             to reach the break-even point before it can record a true profit. Breakeven
             analysis determines the operating costs for a business, as well as records
             its absolute profits. Thus, even a "mature business would be wise to look
             at their current break-even point and perhaps find ways to lower that
             benchmark to increase profits. The recent massive layoffs at large
             corporations are directed at this goal, lowering the break-even point and
             increasing profits." (Business Town.com, "Break-Even Analysis, 2003)
             What factors would cause a difference in the use of financial leverage for
             a utility company and an automobile company'
             Utility companies are often legal monopolies, controlled by the
             government, or experience only limited local competition, unlike automobile
             companies that are private and experience international and national
             competition. Financially, the automobile company has greater opportunities
             to expand its profits but also a greater opportunity to experience greater
             losses in an indeterminate competitive environment. Specifically, in terms
             of financial leverage, the automobile industry also has a greater
             proportion of fixed costs than the utility industry, and thus may be less
             attractive in terms of securing financial leverage. (Scott, 1998) But the
             automobile company has more areas of potential profit making, as well as
             more areas on its books to accrue potential losses, because of costs it
             Explain how the break-even point and operating leverage are affected by the
             choice of manufacturing facilities (labor intensive versus capital
             The break-even point is determined by a company's operating costs, which
             include labor. Capital is not factored into a ‘break even' analysis.
             However, the greater the company's proportion of fixed costs, the less

More Essays:

APA     MLA     Chicago
Discuss the various uses for break-even analysis. (1969, December 31). In MegaEssays.com. Retrieved 02:54, January 18, 2017, from http://www.megaessays.com/viewpaper/200840.html