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Using Break-Even Analysis to Determine Your Company’s Financial Health

 
  Arthur F. Rothberg, Managing Director, CFO Edge, LLC  
   
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  Article Summary  
Determining the break-even point is crucial to determining margins, which, in turn, aid in financial planning for the next year. Break-even analysis determines both the minimum amount of sales required to avoid a loss or to “break-even” at the end of the fiscal year and permits you to adjust sales estimates accordingly.

This article reviews the break-even analysis process by discussing elements like the following: fixed costs, variable costs, units, selling price, sales estimates, revenue, profits, and margins. Primary sections address cost components of break-even analysis, the margin of safety, and contribution margin analysis.

The break-even process is invaluable in assessing the financial health of your company. Los Angeles CEOs and CFOs who feel that they do not have the internal expertise or bandwidth to conduct a break-even analysis can benefit significantly from consulting with an outsourced CFO services firm. A professional services firm of this nature can lend their expertise to your financial analysis and provide an objective report for your use.

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