Learn how to identify your business's break-even point and gain knowledge on the basic business profit equation.
The significant changes felt by both the largest and smallest businesses in the past two years mandate significant financial reevaluation. For example, a large firm shifting to work from home will face increased inefficiencies (increasing the variable costs of operations) but will save on rents, utilities, and other fixed operating costs. Many smaller firms, such as restaurants and mom-and-pops are working at a different level of operations, trying to discern how to remain profitable in the new economy. Finally, many small businesses are emerging, whose owners need a fundamental understanding of basic financial tools. Break-even analysis is a core element of financial education, and a must-do for anyone operating a business at any size or scale.
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Agenda
What Is Break-Even Analysis?
- Break Even in Dollars
- Break Even in Unit Quantity
Fundamental Definitions
- Sales Price
- Variable Costs
- Contribution Margin
- Gross Margin
- Fixed Costs
- Profit = Revenue - Total Costs
Introduction to the Break-Even Formula
Three Simple Examples
- Manufacturing Example
- Graphical Illustration
- Retail Example
- Graphical Illustration
- Real Estate Example
- Graphical Illustration
More Complex Situations
- Step-Variable Costs
- Graphical Example
- Economies of Scale
- Graphical Example
- In the Long Run, All Costs Are Variable
Sensitivity Analysis
- Operational Example (Spreadsheet)
- Share Price Example (Spreadsheet)
Advanced Topics
- Impact of Loss Leaders
- Alternative Processes
- Targeted Profits
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Why Lorman?
Over 35 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.
Credits
OnDemand Course
This course was last revised on September 14, 2021.
Call 1-866-352-9540 for further credit information.
- AIPB 1.5
- This program is acceptable for 1.5 CPEC(s) towards the CB designation through the American Institute of Professional Bookkeepers (AIPB).
This program does NOT qualify, nor meet the National Standard for NASBA accreditation.
MP3 Download
This program does NOT qualify, nor meet the National Standard for NASBA accreditation.
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Why Lorman?
Over 35 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.
Faculty
John A. Kilpatrick, Ph.D., MAI
Greenfield Advisors LLC
John A. Kilpatrick, Ph.D., MAI, FRICS
- Manages Greenfield Advisors LLC, a Seattle-based consulting firm, as well as ACCRE, a private real estate hedge fund
- A world-renowned author, lecturer, and business practitioner
- Author or contributing author to 10 texts on business and over 100 journal and magazine articles, a highly sought-after consultant on bet the firm financial problems
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Why Lorman?
Over 35 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.
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