company created in order to make a profit.Of course, large corporations will argue that "they think of us," "we deserve it", and so on. N. But it all starts with the profit.If it is constantly growing - business is profitable if the contrary - the company considered "Burned."
What you need to know to stay on the market?What methods of forecasting and calculations apply firmachi beginner?One of the most simple, but no less reliable - the ability to build a break-even chart.
basic concepts of sustainability of the enterprise
It is impossible to open a business without worrying about when it will bring the first profit.Fundamentals of Economics, taught even high school students, provide information on business planning.The most important skills of a businessman should not be considered as "an entrepreneurial streak," as the ability to assess the risks, costs and time spent.Indicators of sustainability of the enterprise may include such basic features as:
- break-even production schedule;
- safety factor of production;
- levers accelerating production.
little history
In the early 30-ies of the last century, the scale of production increased quite rapidly.In an increasingly competitive assessment methodology needed business opportunities.It was then and there was a method of estimating the critical volume of production (now known as the break-even chart of the company).Engineer Walter Rautenstrauch proposed to correlate the amount of output from the gross costs of the enterprise.However, to optimize the activity of the firm it took the division of costs into fixed and variable.
Concepts
can say that the success of the enterprise is based on three factors - the price of goods, the volume of production profits.Product price set by the market.The volume of production is determined by the capacity of the enterprise, and profit - production costs.It sounds absurd, but less than the gross cost, the lower the production cost, and therefore, the difference between the market price of the goods and the cost more.This is the profit.
Plotting breakeven just allows you to find the optimal ratio of these characteristics.Microeconomics refers to such analysis CVP-analysis.Abbreviation formed by the first letters of English words: Cost-Volume-Profit.It is important before the start of production activities to carry out such an analysis, to avoid disappointment in the future.
One element of the CVP is the calculation of the volume of production, in which the initial investment and operating costs will be repaid.In other words, we can say that the analysis of break-even schedule to determine when the company will be profitable.
What you need to know in order to plot the
answer questions about the preparation of the first profits can be in two ways: to determine the time (six months, for example) or to calculate the amount of product you want to sell (1000 pieces of goods).In both cases we speak of calculating the breakeven point.This is a situation in which the sum of all expenses of the enterprise, including the initial investment will be equal to the income from sold on the market price of units sold.
How to build a break-even chart?First, you need this data:
- Fixed costs - are costs that do not depend on the volume of production.In the formulas abbreviated TFC (total fixed cost).When it comes to new projects, the fixed costs are considered to be initial investment.
- Variable costs - the cost of this production output.These abbreviated TVC (total variable cost).
market price per unit of output.It is denoted by Latin letter P (price).
Required assumptions
In practice, saying that the time of production coincides with the point of sale, only the services sector.It was there that the hairdresser sells his skills as a haircut client chef prepares salad only after it ordered the visitor, and so on. D. Therefore, in order to build a break-even chart, you must make a few reservations:
- time of production of the commodity coincidesSince its sale;
- consumption rates per unit of product, and the cost of supplies and raw materials remain unchanged for the period of calculation;
- also fix the retail price;
- determine the dependence of revenues on the volume of output linear function.
How to calculate breakeven point
Actually, the formula to determine the required volume of output is as follows:
BEPunits = TFC / (P-VC).
If the resulting number of goods produced divided by the rate of output a day, we get the time in which the project will pay off.It should be remembered that in the month of no more than 22 working days.For convenience, the calculations usually take the length of a month of 20 days.
simple example calculation.It is necessary to invest 20 thousand. Den.uWhen variable costs in 25 den.uYou can adjust the volume of sales at a price of 50 d.uSimple calculations give a profitability threshold of 800 units units (BEPunits = 20000 / (50-25) = 800 shares).Having determined that a day can produce 5 units of production, we find that you need 160 days to start to make a profit.It remains only to determine the amount of income needed to reach break-even point.Multiply the calculated volume of output in the retail price (800 * 50) and obtain the 4000 den.u
analytical value of the break-even schedule
Business planning involves identifying risks that could undermine the whole business.Schedule a break-even is one of the methods of forecasting and analysis.For this it is necessary to consider the activity within the company certain time period.
In this case, the fixed costs include no capital costs, and regardless of the amount of output costs: payments for insurance and loans, payment of industrial premises (if rental) and so on. D. If the company produces more than one type of product,and survive in the modern world with a portfolio of products is not possible, it is necessary to perform calculations for all kinds of goods.In this case, you need to build a break-even chart in Excel.This will significantly reduce the time required.By building on the same plane as all the graphs, analysts can determine what goods actually sold successfully on the market, and some - a burden for the company.
allocation of fixed costs to determine the share of each group of products in total.Fixed costs are allocated according to the proportion made up.
stock of financial strength
When plotted, the breakeven point is picked.This means that you can calculate and supply the financial strength of the enterprise.It determines how much the firm can safely for themselves to reduce the volume of output.For calculations using the difference between the sales proceeds and the break-even point, referred to the revenue.The resulting characteristic determines the percentage of release of the goods, which can reduce the volume of production.
should be noted that the strength of the resulting value is not an exact characteristic.The fact that companies in the portfolio are "successful" products and "lagging".By reducing the production of "successful" to the maximum possible number, you can get a negative result of the firm.
Production leverage
What else can you find out if expect break-even chart?Data on costs and revenues can be used to determine the production of leverage.This characteristic shows the percentage change in profits by increasing the production of 1%.To calculate the required margin between revenue generation and operating costs divided by the same margin, pre-reduced in the amount of fixed costs.This rate can change over time, so it is necessary to clearly define the time period.
Calculations for trading
How to build a break-even chart for the shop sells a variety of product areas?Even when using the software with the charts of the plane will be so loaded that the analyst will take time to "decoding" of the result.For a rough estimate of the breakeven point, you can use this formula:
BEPincome = TFC * (100 / i).
index i determines the average retail margin.
Plotting
Most people are more receptive to a graphical representation of information.To determine the break-even point, you can draw a break-even chart in Excel.The vertical axis typically defines money (revenue, cost, price and so on. N.).The horizontal axis represents the unit of production (sometimes - time).
Basic knowledge in mathematics tell us that the schedule of fixed costs - a line parallel to the horizontal axis;schedule variable costs emerges from the axes.Similarly, from the origin of the leaves and the schedule of income.To determine the break-even point is necessary to build and schedule common (gross) costs.This line will run parallel to the variable costs, but the beginning of it lies on the vertical axis at the level of fixed costs.
point at which a graph intersects the gross cost schedule of income and determine the break-even production.
