# Finance Self Study Guide for Staff of Micro Finance Institutions BREAK-EVEN ANALYSIS

Save this PDF as:

Size: px
Start display at page:

Download "Finance Self Study Guide for Staff of Micro Finance Institutions BREAK-EVEN ANALYSIS"

## Transcription

1 Finance Self Study Guide for Staff of Micro Finance Institutions LESSON 3 BREAK-EVEN ANALYSIS Objectives: This session will provide the tools necessary to determine the break-even point for a borrower activity, for an income generating project, or for a micro-finance organization branch. Profitability can be forecast and managed when one knows: i) at what level of production a business will be able to cover all of its expenses; ii) what minimum product price is needed for the product to be viable at different levels of production; and iii) what happens if the financial estimate of costs and prices are changed. You will learn how to calculate a break-even point for an income generating activity and for a branch. Topics covered include: Fixed costs Variable costs Contribution margin Required break-even volume/revenue Break-even portfolio size Fixed Costs The break-even point of a service or product is reached when total revenue equals total costs. Break-Even Analysis is the process of determining the rates at which resources generate revenue and expenses. It is important to calculate the breakeven point to determine if the resources of an organization provide sufficient revenue to meet expenses. The goal is to exceed the break-even point so that additional income (or profit) results. Consider the difference between fixed and variable costs. Fixed costs are those incurred on an ongoing basis and are not dependent on the level of production. [Note: fixed costs may increase with a significant increase in the level of production.] Fixed costs are costs which remain the same regardless of whether the operation makes one product or several hundred. They represent the minimum cost of operations. For example, to rear day-old chicks, an incubator is required. An incubator is a fixed asset and is a cost regardless of the volume of day-old chicks reared. Until a certain volume of production is reached, another incubator is not required. Fixed costs can be capital costs such as the costs to purchase a fixed asset, or operating costs such as rent or utilities. Think of some examples of fixed costs of businesses to which micro-finance organizations might lend. Examples are: rent, depreciation, maintenance and repair, salaries, insurance, utilities, fees, etc. Consider the differences between various businesses and the fixed costs associated with them. Calmeadow 1

2 Step Costs: Other fixed costs are those that are considered "step" costs or those that increase once specific volume levels are reached. An example would be the purchase of another incubator once a certain number of chicks were produced. Other businesses incur step costs when a new employee is hired as the business grows. In the long-run, all fixed costs are step costs. Variable Costs Variable costs are those that are directly related to production and vary depending on the volume produced. For example, to rear more chicks, more day-old chicks are required. The purchase of day-old chicks is a variable cost for the business, that is, it increases with the volume of activity. What are some examples of variable costs of income generating activities? Examples are: raw materials, direct labour, commissions, etc. Place the sheet next to the fixed costs written out earlier. Consider the differences between various businesses and the variable costs associated with them. Variable costs per unit are constant while fixed costs per unit change with the volume of production. For example, if the variable costs (such as fuel, labour, etc.) of irrigating one acre of land are P70, then P700 is required to irrigate ten acres. If the number of acres increases, the variable costs will also increase. However, the variable cost per acre of land remains the same (P70). In contrast, fixed costs per acre of land decrease if the volume of land is increased. If one well supplies water to ten acres of land and the cost of the well is P100,000, then the fixed cost per acre is P10,000. If the volume of land to which the well supplies water is increased to 20 acres from 10, then the fixed cost per acre decreases to P5,000. Fixed costs do not decrease in total but decrease as a per acre cost as the volume of irrigated land increases. Contribution Margin To be profitable, all fixed and variable costs must be covered by revenue earned. To determine how much revenue is required per item (price to be charged) to cover all costs, the contribution margin is calculated. The contribution margin is defined as revenue less variable costs per item. Refer to the example on the next page, Break-Even Analysis I and go through each of the fixed and variable costs. Continue with the example and calculate the contribution margin. This is the amount per chair that contributes to covering the fixed costs of the carpentry workshop. Required Break-Even Volume/Revenue Continuing with the example, calculate the required break-even volume. The resulting number of chairs is the minimum that must be produced in the time period which the fixed costs are budgeted for to break even. If fixed costs increase due to increased prices or if the cost structure changes then the break even volume will also change. Calmeadow 2

3 Break Even Analysis I SAMPLE CARPENTRY BUSINESS Fixed Costs (Monthly) Depreciation of tools ( 15,000/year) 1,250 Rent 500 Utilities 220 Assistant s Salary 200 TOTAL 2,170 Variable Costs per Chair Wood 150 Paint and others 50 TOTAL 200 Revenue per chair (market price) 300 Contribution Margin (Revenue Variable Cost) Contribution Margin per Chair = 100 Required Break Even Volume Break Even Point = Total Fixed Costs Contribution Margin = 2, Number of chairs required to break even = 22 chairs per month Required Break Even Revenue Break Even Point = (22 chairs x 200) + fixed costs = 4, ,170 Revenue required to break even = 6,570 per month Many businesses produce more than one item. Break Even Analysis II builds on the same information for fixed costs as Break Even Analysis I except there are now chairs, tables and cabinets being produced which provide different contribution margins. The break-even volume can be calculated on each item produced only if the fixed costs can be split among items. For example, if an equal number of chairs, tables and cabinets are made and they take an equal amount of time to make, then the contribution margins can simply be added together and divided by three. If there are more chairs than tables and cabinets produced, then the number of chairs, tables and cabinets produced must be multiplied by the contribution margin for each. Work through each of the contribution margins on the next page and then calculate the weighted contribution margin and required break-even volume as in the example. Calmeadow 3

4 Break Even Analysis II SAMPLE CARPENTRY BUSINESS Variable Costs per Chair (Monthly) Wood 150 Paint and others 50 TOTAL 200 Revenue per chair 300 Contribution Margin (Revenue Variable Cost) Contribution Margin per Chair = 100 Variable Costs per Table Wood 250 Paint and others 65 TOTAL 315 Revenue per table 450 Contribution Margin (Revenue Variable Cost) Contribution Margin per Table = 135 Variable Costs per Cabinet Wood 450 Paint and others 125 TOTAL 575 Revenue per Cabinet 700 Contribution Margin (Revenue Variable Cost) Contribution Margin per Cabinet = 125 Contribution margin of each product: chairs 100 tables 135 cabinets 125 Example weighted contribution: If the percentage of total products produced were as follows: chairs 40% tables 30% cabinets 30% 100% and the Contribution Margins for each product were the same as listed above, then: (i) Weighted Contribution Margin = (40% x 100) + (30% x 135) + (30% x 125) = 118 per item per month (ii) Required Break-Even Volume = Total Fixed Costs Weighted Contribution Margin = 2, = 19 items per month produced in the same proportion as above Calmeadow 4

5 Break-Even Portfolio Size Just as it is possible to determine the break-even point for a borrower s business, we can calculate the size of portfolio required for a branch or a micro-finance organization as a whole using break-even analysis. First it is necessary to calculate the Variable Cost Rate: Variable Cost Rate = Total Costs Fixed Costs Average Portfolio Outstanding Using the effective cost calculation we covered in the last session, an estimation of the yield to the branch or organization can be calculated. This is referred to as the Portfolio Yield Rate and combines all interest and fees charged on the loan. Then we calculate the Contribution Margin (or Overhead Contribution Rate): Contribution Margin = Portfolio Yield Rate Variable Cost Rate As in the previous examples, the Break-Even rate is simply Fixed Costs divided by the Contribution Margin. Go through the following example: Break Even Analysis III BRANCH Fixed Costs (Annual) Salaries and benefits 16,080 Rent 8,400 Utilities 1,440 Administration costs 3,600 Other costs 2,400 TOTAL 31,200 Variable Costs per 1,000 Outstanding Financial Cost (%) 6.0 Transportation (%) 5.4 Loan loss provision (%) 3.0 TOTAL (%) 14.4 Revenue (yield) per 1,000 outstanding (%) 36.0 Contribution Margin (Yield Variable Cost Rate) = 21.6 Contribution = Contribution Margin x Portfolio Outstanding = 21.6% x 1,000 = 216 Required Break Even Volume Break Even Point = Total Fixed Costs Contribution = 31, = 144 Volume of 1,000 outstanding required to break even = 144 x 1,000 outstanding = 144,000 outstanding/year Calmeadow 5

6 Complete the following Break-even Exercises. Break-Even Analysis EXERCISES 1. What are fixed costs? 2. What are variable costs? 3. What is the break-even point? 4. Define the contribution margin. 5. Write down the formula for the break-even point. Calmeadow 6

7 6. Define the term step cost. 7. Selina runs a weaving business. She makes and sells hand woven cloth by the metre. She produces 12 metres of cloth per month which she sells at a stand in the market each Sunday. She borrowed 15% annual flat rate from the Finance Fund of Guatemala for 6 months with monthly payments. Other information on her business includes: i) She purchased a hand loom for Q2,000, which she is depreciating over 2 years at Q83 per month ii) The cost of coloured threads is Q250 per metre iii) Transportation costs are Q100 per month iv) Stall rental is Q60 per month v) Selling price of the cloth is Q350 per metre Calculate the break-even point in metres and sales revenue per month. 8. The ABC Credit company incurs the following monthly expenses: Salaries and benefits 3,400 Administration expenses 1,620 Rent and utilities 1,440 Other fixed expenses 800 Interest on 12% annual rate per 1, Interest paid on 6% annual rate per 1,000 5 Travel and transportation per 1,000 loans outstanding 4.5 The ABC Credit company earns a 20% yield on their loans. Calculate the portfolio size required to break even in a month. Calmeadow 7

### Finance Self Study Guide for Staff of Micro Finance Institutions VIABILITY OF A MICROFINANCE ORGANIZATION

Finance Self Study Guide for Staff of Micro Finance Institutions LESSON 4 VIABILITY OF A MICROFINANCE ORGANIZATION Objectives: Micro-finance organizations are becoming more and more concerned with financial

### Accounting Self Study Guide for Staff of Micro Finance Institutions

Accounting Self Study Guide for Staff of Micro Finance Institutions LESSON 5 Summarizing Changes in Financial Position OBJECTIVES The purpose of this lesson is to show how to summarize the transactions

### Variable Costs. Breakeven Analysis. Examples of Variable Costs. Variable Costs. Mixed

Breakeven Analysis Variable Vary directly in proportion to activity: Example: if sales increase by 5%, then the Variable will increase by 5% Remain the same, regardless of the activity level Mixed Combines

### Definition of Accounting

SOLUTIONS TO EXERCISES Lesson 1: Definition of Accounting 1. What is accounting? What are its main functions? Accounting is the process of financially measuring, recording, summarizing and communicating

### Cash Flow Forecasting & Break-Even Analysis

Cash Flow Forecasting & Break-Even Analysis 1. Cash Flow Cash Flow Projections What is cash flow? Cash flow is an estimate of the timing of when the cash associated with sales will be received and when

Contents Highlights... 2 Quick Practice Session on Overheads... 2 Financial Quiz 2 - Overheads... 3 Learning Zone Overheads... 3 Fixed and Variable costs and Break-even analysis explained... 3 Fixed Costs...

### Accounting Self Study Guide for Staff of Micro Finance Institutions

Accounting Self Study Guide for Staff of Micro Finance Institutions LESSON 2 The Balance Sheet OBJECTIVES The purpose of this lesson is to introduce the Balance Sheet and explain its components: Assets,

### SMALL BUSINESS OWNER S HANDBOOK

SMALL BUSINESS OWNER S HANDBOOK PART II: FINANCIAL PLANNING FOR SMALL BUSINESSES Introduction Financial Planning Methods of Financing Your Business Other Types of Funds & Financing How to Approach Lenders

### 29.1 COST SHEET : MEANING AND ITS IMPORTANCE

29 COST SHEET You are running a factory which manufactures electronic toys. You incur expenses on raw material, labour and other expenses which can be directly attibuted to cost and which cannot be directly

### Financial. Management FOR A SMALL BUSINESS

Financial Management FOR A SMALL BUSINESS 1 Agenda Welcome, Pre-Test, Agenda, and Learning Objectives Benefits of Financial Management Budgeting Bookkeeping Financial Statements Business Financing Key

### BACKGROUND KNOWLEDGE for Teachers and Students

Pathway: Business, Marketing, and Computer Education Lesson: BMM C6 4: Financial Statements and Reports Common Core State Standards for Mathematics: N.Q.2 Domain: Quantities Cluster: Reason quantitatively

### Business location Expected start-up date Form of ownership

Disclaimer The material is provided for information purposes only. It does not represent complete business planning, legal, accounting and other business advise. It is recommended that appropriate business

### Financial Plan. A) Estimated One-Time Financial Requirements. Part One

Financial Plan The Financial Plan is perhaps one of the most important components of your Business Plan (see Business Plan Handout). Not only is it essential if you are seeking external financing it is

### Breakeven Analysis. Takes the user to the data input worksheet of the tool.

Breakeven Analysis This program allows the user to calculate breakeven price and yield levels and prepare projected net farm income and cash flow statements. The Breakeven Analysis program assists farm

### CC.2.1.HS.F.5 -- Essential Choose a level of accuracy appropriate to limitations on measurement when reporting quantities. 1 -- Essential. them.

Topic: 04-Business Expense Management Know: Understand: Do: CC.2.1.HS.F.5 -- Essential Choose a level of accuracy appropriate to limitations on measurement when reporting quantities. CC.2.2.HS.D.8 -- Essential

### Breakeven Analysis. Breakeven for Services.

Dollars and Sense Introduction Your dream is to operate a profitable business and make a good living. Before you open, however, you want some indication that your business will be profitable, if not immediately

### COST & BREAKEVEN ANALYSIS

COST & BREAKEVEN ANALYSIS http://www.tutorialspoint.com/managerial_economics/cost_and_breakeven_analysis.htm Copyright tutorialspoint.com In managerial economics another area which is of great importance

### How to Prepare a Cash Flow Forecast

The Orangeville & Area Small Business Enterprise Centre (SBEC) 87 Broadway, Orangeville ON L9W 1K1 519-941-0440 Ext. 2286 or 2291 sbec@orangeville.ca www.orangevillebusiness.ca Supported by its Partners:

### Breakeven Point Calculation (BEP)

Breakeven Point Calculation (BEP) In order to maintain positive practice growth and cash flow, it is essential to know the economic condition of your practice. Calculating the Break Even Point (BEP) allows

### BSBSMB303A Organise finances for the micro business

BSBSMB303A Organise finances for the micro business Revision Number: 1 BSBSMB303A Organise finances for the micro business Modification History Not applicable. Unit Descriptor Unit descriptor This unit

### Financial. Management FOR A SMALL BUSINESS

Financial Management FOR A SMALL BUSINESS Welcome 1. Agenda 2. Ground Rules 3. Introductions FINANCIAL MANAGEMENT 2 Objectives Explain the concept of financial management and its importance to a small

### ACCOUNTING FOR NON-ACCOUNTANTS MARGINAL COSTING

ACCOUNTING FOR NON-ACCOUNTANTS MARGINAL COSTING MARGINAL COSTING OBJECTIVE To be able to: Explain the relevance to management decisions of: Fixed costs Variable costs Contribution Prepare an operating

### 184. PROFILE ON MICRO FINANCE SERVICE

184. PROFILE ON MICRO FINANCE SERVICE 184-2 TABLE OF CONTENTS PAGE I. SUMMARY 184-3 II. SERVICE DESCRIPTION & APPLICATION 184-3 III. MARKET STUDY AND SERVICE CAPACITY 184-4 A. MARKET STUDY 184-4 B. CAPACITY

### RAPID REVIEW Chapter Content

RAPID REVIEW BASIC ACCOUNTING EQUATION (Chapter 2) INVENTORY (Chapters 5 and 6) Basic Equation Assets Owner s Equity Expanded Owner s Owner s Assets Equation = Liabilities Capital Drawing Revenues Debit

### 6.3 PROFIT AND LOSS AND BALANCE SHEETS. Simple Financial Calculations. Analysing Performance - The Balance Sheet. Analysing Performance

63 COSTS AND COSTING 6 PROFIT AND LOSS AND BALANCE SHEETS Simple Financial Calculations Analysing Performance - The Balance Sheet Analysing Performance Analysing Financial Performance Profit And Loss Forecast

### Math 1314 Lesson 8: Business Applications: Break Even Analysis, Equilibrium Quantity/Price

Math 1314 Lesson 8: Business Applications: Break Even Analysis, Equilibrium Quantity/Price Cost functions model the cost of producing goods or providing services. Examples: rent, utilities, insurance,

### Chapter 10 Revenue, costs and break-even analysis

Chapter 10, costs and break-even analysis, costs and break-even analysis is the money a business makes from sales. In other words, it is the value of the sales and is also referred to as turnover. The

### the original accounting office for small business 2016/2017 Company, Trust or Partnership Tax Return Checklist

2016/2017 Company, Trust or Partnership Tax Return Checklist Page 1 Name of taxpayer: : Address: Preferred Contact No: Income Accounting information, including trial balance, profit & loss and balance

### LEBANESE ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS MANAGERIAL ACCOUNTING

LEBANESE ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS MANAGERIAL ACCOUNTING JULY 2015 MULTIPLE CHOICE QUESTIONS (37.5%) Choose the correct answer 1. All of the following statements concerning standard costs

### 2015 Individual Tax Return Checklist

2015 Individual Tax Return Checklist Name of taxpayer: Address: Preferred contact no.: Income PAYG payment summaries (eg from employers) Lump sum payments (eg employment termination payment) Partnership

### Repayment Capacity Analysis

Repayment Capacity Analysis With this program, the user can estimate the cash needs required to meet living, debt, and investment payments plus evaluate the risks and returns for seven different types

### PROFIT PLANNING OR: MANAGEMENT ACCOUNTING (Part I)

PROFIT PLANNING OR: MANAGEMENT ACCOUNTING (Part I) by Murray Rumack, FCA, MIMC (The following is the first of a two-part series which represents an address given by Mr. Rumack, a principal in the Toronto

### Costing and Break-Even Analysis

W J E C B U S I N E S S S T U D I E S A L E V E L R E S O U R C E S. 28 Spec. Issue 2 Sept 212 Page 1 Costing and Break-Even Analysis Specification Requirements- Classify costs: fixed, variable and semi-variable.

### Practical Business Application of Break Even Analysis in Graduate Construction Education

Journal of Construction Education Spring 1999, Vol. 4, No. 1, pp. 26-37 Copyright 1999 by the Associated Schools of Construction 1522-8150/99/\$3.00/Educational Practice Manuscript Practical Business Application

### Quantitative Marketing Analysis

Quantitative Marketing Analysis CLASS 2 09.16.13 Revenue (sales) Income Statement Sections 5 Expenses Cost of goods sold (FC and VC) Operating expenses (generally FC) Profit 1 EXHIBIT 2.4: PRO FORMA INCOME

### Example 2: A company s car has an original value of \$85, 000 and will be depreciated linearly over 6 years with scrap value of \$10,000.

Section 1.5: Linear Models An asset is an item owned that has value. Linear Depreciation refers to the amount of decrease in the book value of an asset. The purchase price, also known as original cost,

### Fill in the Blanks Feasibility Study Worksheet

Fill in the Blanks Feasibility Study Worksheet The Arizona SBDC Network is partially funded through a cooperative agreement with the US Small Business Administration. The SBA s funding is not an endorsement

### Module 2: Preparing for Capital Venture Financing Building Pro-Forma Financial Statements

Module 2: Preparing for Capital Venture Financing Building Pro-Forma Financial Statements Module 2: Preparing for Capital Venture Financing Building Pro-Forma Financial Statements TABLE OF CONTENTS 1.0

### Accounting Building Business Skills. Learning Objectives: Learning Objectives: Paul D. Kimmel. Chapter Fourteen: Cost-volume-profit Relationships

Accounting Building Business Skills Paul D. Kimmel Chapter Fourteen: Cost-volume-profit Relationships PowerPoint presentation by Kate Wynn-Williams University of Otago, Dunedin 2003 John Wiley & Sons Australia,

### COSTS AND COSTING 6 6.2 COST CENTRE ANALYSIS AND CONTROLLING FINANCES. Cost Centre Analysis. Cost Centre Analysis Exercises P 207

62 COSTS AND COSTING 6 COST CENTRE ANALYSIS AND CONTROLLING FINANCES Cost Centre Analysis Cost Centre Analysis Exercises P 207 COST CENTRE ANALYSIS Any activity can be analysed by its costs and the output

### Money Math for Teens. Break-Even Point

Money Math for Teens Break-Even Point This Money Math for Teens lesson is part of a series created by Generation Money, a multimedia financial literacy initiative of the FINRA Investor Education Foundation,

### Financial Projections

Financial Projections Introduction Any business plan must include a section detailing the financial projections, because these projections are a forecast of the future economic-financial results of the

Export Business Plan Guide Table of Contents Introduction... 4 SECTION 01: CURRENT SITUATION ANALYSIS... 5 Company Overview... 5 Availability of Resources... 6 SWOT Analysis... 9 SECTION 02: MARKET ANALYSIS...

Understanding Financial Statements For Your Business Disclaimer The information provided is for informational purposes only, does not constitute legal advice or create an attorney-client relationship,

### Accounting Practice Questions

Accounting Practice Questions 1) The fundamental accounting equation states that: a) assets = liabilities + owner s equity b) assets = liabilities + drawings c) assets = liabilities + net income d) assets

### Financial Statement in Small Business. 103 MGT Entrepreneurship. Income Statement

Financial Statement in Small Business 103 MGT Entrepreneurship 1 st semester 1433-1434 Entrepreneur should use three financial statements: 1. 2. Cash Flow Statement 3. Balance Statement Monthly statement

### University 18 Lessons Financial Management. Unit 7: Financial and Operating Leverage

University 18 Lessons Financial Management Unit 7: Financial and Operating Leverage Approaches to Determine Appropriate Capital Structure What is Capital Structure The term capital structure is used to

### Understanding budgets and the budgeting process R. L. Smathers

ALTERNATIVE AGRICULTURAL ENTERPRISES PRODUCTION, MANAGEMENT & MARKETING Understanding budgets and the budgeting process R. L. Smathers As a business owner, the primary problem you face is a limited supply

### NSW BOARDING ACCOMODATION CALCULATOR USER GUIDELINES

NSW BOARDING ACCOMODATION CALCULATOR USER GUIDELINES ORIGINALLY PREPARED FOR NSW DEPARTMENT OF HOUSING IN MAY 2007 BY HILL PDA. AMENDED JULY 2010 BY HOUSING NSW 1 WHAT IS THE BOARDING ACCOMMODATION CALCULATOR?

### Too often business owners do a cash flow in their head. Putting the information down on paper will give you the following:

CASH FLOW A cash flow is a forecast of when you expect to receive cash from your sales and when you expect to pay your bills. It is not and should not be confused with a pro-forma income statement. A cash

### Summary of Financial Report for the FY ending March 2015 (Non-Consolidated)

Summary of Financial Report for the FY ending March 2015 (Non-Consolidated) April 30, 2015 Listed Company Name: Japan Tissue Engineering Co., Ltd. Listed Securities Exchange: JQ Stock Code: 7774 URL http://www.jpte.co.jp

### The University of Georgia

The University of Georgia Center for Agribusiness and Economic Development College of Agricultural and Environmental Sciences Estimating a Business Opportunity s Economic Vitality DRAFT Prepared by: Kent

### Crop-Share and Cash Rent Lease Comparisons Version 1.6. Introduction

Crop-Share and Cash Rent Lease Comparisons Version 1.6 Alan Miller and Craig L. Dobbins Spreadsheet can be found at http://www.agecon.purdue.edu/extension/pubs/farmland_values.asp Introduction This spreadsheet

### Need to know finance

Need to know finance You can t hide from it Every decision has financial implications Estimating sales and cost of sales (aka direct costs) Gross Profit and Gross Profit Margin (GPM) Sales cost of sales

### Harlem Business Alliance. Financial Ratios and Projection Assumptions

1 Harlem Business Alliance Financial Ratios and Projection Assumptions 2 Why is this Important? Growth Map (\$m) \$35 \$20 \$15 \$4 Year 1 Year 2 Year 3 Year 4 Entrepreneurs are in business to make a profit.

### Paper P1 Performance Operations Post Exam Guide September 2011 Exam. General Comments

General Comments Performance on this paper was better than in previous sittings mainly as a result of improved performance in Sections A and B. Candidates scored better on average in the multiple choice

### Identify how changes in volume affect costs

Chapter 18 Identify how changes in volume affect Total variable change in direct proportion to changes in the volume of activity Unit variable cost remains constant Units produced 3 5 Total direct materials

### Math 1314 Lesson 8: Business Applications: Break Even Analysis, Equilibrium Quantity/Price

Math 1314 Lesson 8: Business Applications: Break Even Analysis, Equilibrium Quantity/Price Cost functions model the cost of producing goods or providing services. Examples: rent, utilities, insurance,

### Applications of Linear Equations. Chapter 5

5-2 Applications of Linear Equations Chapter 5 5-3 After completing this chapter, you will be able to: > Solve two linear equations in two variables > Solve problems that require setting up two linear

### UNDERSTANDING WHERE YOU STAND. A Simple Guide to Your Company s Financial Statements

UNDERSTANDING WHERE YOU STAND A Simple Guide to Your Company s Financial Statements Contents INTRODUCTION One statement cannot diagnose your company s financial health. Put several statements together

### Quick Cash Flow Projections

Quick Cash Flow Projections The Quick Cash Flow Projections tool assists farm operators in projecting cash needs, farm profitability, and debt servicing capabilities. The program also aids users in performing

### Math 1314 Lesson 8 Business Applications: Break Even Analysis, Equilibrium Quantity/Price

Math 1314 Lesson 8 Business Applications: Break Even Analysis, Equilibrium Quantity/Price Three functions of importance in business are cost functions, revenue functions and profit functions. Cost functions

### Developing Financial Statements

New York StartUP! Business Plan Competition Developing Financial Statements Presented by Paisley Demby, CEO PBN Consulting, LLC www.pbnconsulting.com 1 Invitation to Tweet #2015NYStartUp PaisleyDemby Contents

### WORKING CAPITAL MANAGEMENT

CHAPTER 9 WORKING CAPITAL MANAGEMENT Working capital is the long term fund required to run the day to day operations of the business. The company starts with cash. It buys raw materials, employs staff

BUSINESS CASE STUDIES Below you will find 2 Case Studies of 2 very different organisations. An small Advertising Firm; & a well established Construction Equipment Hire Business. Most business owners have

### Learning Objectives: Quick answer key: Question # Multiple Choice True/False. 14.1 Describe the important of accounting and financial information.

0 Learning Objectives: 14.1 Describe the important of accounting and financial information. 14.2 Differentiate between managerial and financial accounting. 14.3 Identify the six steps of the accounting

### Construction Economics & Finance. Module 6. Lecture-1

Construction Economics & Finance Module 6 Lecture-1 Financial management: Financial management involves planning, allocation and control of financial resources of a company. Financial management is essential

Module 2: Preparing for Capital Venture Financing Financial Forecasting Methods Module 2: Preparing for Capital Venture Financing Financial Forecasting Methods 1.0 FINANCIAL FORECASTING METHODS 1.01 Introduction

### Pricing for Microfinance

1 The Russia Microfinance Project Document No.55 A U.S. Department of State/NISCUP Funded Partnership among the University of Washington-Evans School of Public Affairs, The Siberian Academy of Public Administration,

### Individual Income Tax Return Checklist

Individual Income Tax Return Checklist Income PAYG Summary Statement Deductions Motor Vehicle & Travel Expenses Appendix A Lump Sum Payments Receipts of work related expenses (eg. Employment Termination

### FEASIBILITY ANALYSIS

FEASIBILITY ANALYSIS A. RESPONSIBILITIES An important point to consider is the ability of you (and your associates, if any) to successfully carry out all of the responsibilities that will be required to

### Financial Statement Consolidation

Financial Statement Consolidation We will consolidate the previously completed worksheets in this financial plan. In order to complete this section of the plan, you must have already completed all of the

### Blended Value Business Plan Pro Forma Income Statement User Guide

Blended Value Business Plan Pro Forma Income Statement User Guide OVERVIEW A business plan goes beyond the forecasting of a Feasibility Study. It provides details on the multiple factors required to develop

### Preparing a Successful Financial Plan

Topic 9 Preparing a Successful Financial Plan LEARNING OUTCOMES By the end of this topic, you should be able to: 1. Describe the overview of accounting methods; 2. Prepare the three major financial statements

### Comprehensive Financial Analysis

First West Credit Union 2012 md&a Comprehensive Financial Analysis Comprehensive Financial Analysis Balance Sheet Management Total Assets Total assets increased \$428 million or 7.8% in 2012 compared with

### Enterprise Budgeting. By: Rod Sharp and Dennis Kaan Colorado State University

Enterprise Budgeting By: Rod Sharp and Dennis Kaan Colorado State University One of the most basic and important production decisions is choosing the combination of products or enterprises to produce.

Small Business Income Tax Forms of Business & how their taxes are paid. Keeping Records Legal requirements. Bringing Assets into a business. Fair market value. Earnings Fiscal period Income Expenses What

### FINANCIAL SERVICES BOARD COLLECTIVE INVESTMENT SCHEMES

FINANCIAL SERVICES BOARD COLLECTIVE INVESTMENT SCHEMES INTRODUCTION This booklet will provide you with information on the importance of understanding ways in which Collective Investment Schemes ( CIS )

### Their point of intersection is the break-even point. The graph. Loss at right represents a break-even situation.

Chapter Financial arithmetic 17 Break-even analysis The success or failure of any business enterprise can be expressed mathematically as follows: P = R C or L = C R where: P = profit made by a business

### * * * Chapter 15 Accounting & Financial Statements. Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

Chapter 15 Accounting & Financial Statements Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall Bookkeeping vs. Accounting Bookkeeping Accounting The recording of business transactions.

### Marginal and. this chapter covers...

7 Marginal and absorption costing this chapter covers... This chapter focuses on the costing methods of marginal and absorption costing and compares the profit made by a business under each method. The

### CHAPTER 12. Cost Sheet ( or) Statement of Cost ELEMENTS OF COST

CHAPTER 12 Cost Sheet ( or) Statement of Cost Introduction ELEMENTS OF COST Elements of cost are necessary to have a proper classification and analysis of total cost. Thus, elements of cost provide the

### The term marginal cost refers to the additional costs incurred in providing a unit of

Chapter 4 Solutions Question 4.1 A) Explain the following The term marginal cost refers to the additional costs incurred in providing a unit of product or service. The term contribution refers to the amount

### How to Forecast Your Revenue and Sales A Step by Step Guide to Revenue and Sales Forecasting in a Small Business

How to Forecast Your Revenue and Sales A Step by Step Guide to Revenue and Sales Forecasting in a Small Business By BizMove Management Training Institute Other free books by BizMove that may interest you:

### ICASL - Business School Programme

ICASL - Business School Programme Quantitative Techniques for Business (Module 3) Financial Mathematics TUTORIAL 2A This chapter deals with problems related to investing money or capital in a business

### Identifying Relevant Costs

Relevant Costs for Decision Making Identifying Relevant Costs A relevant cost is a cost that differs between alternatives. An avoidable cost can be eliminated, in whole or in part, by choosing one alternative

### *Financial Assessment Process Will Starting/Expanding Business Make Financial Sense?

Research & Writing a Business Plan Financial Assessment Small Business Development Center University of Wisconsin Oshkosh College of Business Tel. 1-800-232-8939 (In Oshkosh, (920) 424-1453) Web Site:

### Pro Forma Projections How to prepare reasonable projections based on your market and customers

Pro Forma Projections How to prepare reasonable projections based on your market and customers Dennis Beard, Serra Ventures, LLC EnterpriseWorks EIR Workshop Series, February 16, 2011 Workshop Agenda 2

### DEPARTMENT OF SOCIAL SERVICES DIVISION OF LICENSING PROGRAMS. BUDGET PLANS FOR OPERATION OF A CHILD DAY CENTER (Model)

DIVISION OF LICENSING PROGRAMS FOR OPERATION OF A CHILD DAY CENTER (Model) A. Start Up Costs Renovation of Property Furniture Equipment Supplies (Initial Stock) Children's Supplies Cleaning and Maintenance

### ANNUAL SMALL BUSINESS / PERSONAL QUESTIONNAIRE CHECKLIST 31 MARCH 2014

81 Cashmere Road PO Box 28-132 Christchurch 8242 Phone: (03) 337 0076 Mobile: 027 220 6299 Email: cyril@childs.co.nz Website: www.childs.co.nz Name: Balance Date: 31 March 2014 ANNUAL SMALL BUSINESS /

NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY FACULTY OF COMMERCE GRADUATE SCHOOL OF BUSINESS GENERAL MASTER OF BUSINESS ADMINISTRATION MANAGERIAL ACCOUNTING [GMB 5162] FINAL EXAMINATION: DECEMBER 2013

### Financial Planning. Presented by Emma's Garden

+ Financial Planning Presented by Emma's Garden Financial Planning A comprehensive financial plan helps you to forecast and set your financial goals and milestones. Your financial forecasts are an essential

### Section II: Problem Solving (200 points) KEY

ARE 495U Assignment 2-10 points Create 5 or more marketing plan questions that need to be answered related to FF. 2013 North Carolina FFA Farm Business Management Career Development Event Section II: Problem

Basic Business Plan Outline A business plan needs to be a well thought out, honest, appraisal of the business and opportunity. This outline is meant to be used for your road map. It should be a living

### The Basic Framework of Budgeting

Master Budgeting 1 The Basic Framework of Budgeting A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period. 1. The act of

### Accounts payable Money which you owe to an individual or business for goods or services that have been received but not yet paid for.

A Account A record of a business transaction. A contract arrangement, written or unwritten, to purchase and take delivery with payment to be made later as arranged. Accounts payable Money which you owe