Mind Your Business - 18 November 2008
Break-even analysis: Debts, revenues and costs
This is the fourth in a series of resources that is a response to feedback we have received from users. The resources are based on material that featured in our Mind Your Business section but which has been updated and revised to take account of changes in the curriculum and requests from users to have a guide to what might be considered appropriate responses to the questions set.
Students often confuse the purpose and use of break-even analysis and further assume that at some point every firm will break-even and move into profit. This case study is designed to show that this is not always the case. It also highlights the limitations that firms might face in trying to adjust their cost and revenue bases to try and improve their break-even position.
Please note that the guide is not meant to be a model answer and should be taken as being indicative of the type of response that might form the basis of an answer in an examination which would begin to address the assessment objectives being targeted.