4 EssentialConsiderationsin the Preparationof the Break-Even Analysis Excel Template

Break-even is the point wherein the revenue equals costs having a zero profit.Break-even analysis can be derived by calculating and examining the margin of safety for a business based on the revenues collected and costs incurred. It is plotted in an excel template used by financial analysts in providing financial modeling services. Understanding break-even analysis is essential in analyzing different price levels relating to various levels of demand. To prepare a comprehensive report, they need to understand the four essential considerationsin the preparation of the break-even analysis excel template, as follows;

1. Fixed Costs. It is a cost that remains constant, which is not dependent on the units sold produced. It includes costs such as insurance, advertising cost, rent, salaries & wages, and supplies. It is an expense that has to be paid by a company on any specific business activities. Any fixed costs on the income statement should be accounted for in the balance sheet and cash flow statement that may be either short-term or long-term. In general, cutting cost of businesses is an opportunity to lower fixed costs that benefit a company and to increase profitability. 

2. Variable Costs. A lot of factors are considered variable costs, for it will increase or decrease related directly to the production volume. It also depends on products produced and sold, which are affected by many factors directly related to the production, including direct labor, materials, utilities, and other costs.

3. Selling Price. It refers to the price of your product that your business needs to establish selling, whether goods or services. Often, this value remains constant in making break-even analysis. To calculate your revenue, multiply the sales price by the number of products sold.

4. Payback Period. In making analysis, you need to calculate how long it will take for your investment to reach the break-even point. It may take a few years or months, which depends on the change rate in the market. If you plan to apply for funding in banks and other financial institutions, they want your business to prove your profitability by looking at your payback period.

Calculating the break-even point is simple, but you need to understand these four considerationsin preparing the break-even analysis excel template. This excel template is hand for financial analysts in determining the level of production or a targeted desired sales mix of business. Having understood this, enable you to prepare your template, or you may download it from eFinancialModels. Here, they have a comprehensive list of sample templates that is easy to understand.

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