Importance of Using Break Even Analysis Excel Template

The break-even point can be defined as a point where total costs and total sales are equal. It is possible to define the break-even point as a point where there is no net profit or loss. The company just breaks even. Graphically, it is the point at which the overall cost and the curves of total sales intersect.

Taking the components of Break Even together we can construct a formula known as the formula of the break-even point. It is a relatively easy estimate, but in profitability planning it is important. 

Fixed Costs / (Average Price - Variable Cost) = Break-Even Point

So here are few of the many importance of using a Break Even Analysis Excel Template:

• The owner gets to know how many units need to be sold to cover the cost with the help of break-even analysis.To calculate the break-even analysis, the variable cost, the selling price and the overall cost are needed.
• Since a business or owner knows at what point a business will break-even, it makes it easier for them to set a target and set a budget for the company accordingly.In setting a reasonable objective for a company, this analysis can also be applied.
• The income of a company continues to decline in the financial breakdown.The break-even analysis allows the business to determine the least amount of revenue needed to make money.Using the safety report margin; a high business judgment can be executed.
• The profit margin of the business can be influenced by the fixed and variable cost. Thus the management can detect whether any effects change the cost with break-even analysis.
• Break-even analysis is critical for a new company.This guides the management with the pricing policy and to be cost-effective.If the new company is profitable,this review also gives an idea.
• If an established company is going to launch a new product, before launching, they will have to concentrate on break-even analysis to see if the product provides the company with the required investment.
• If there is a change in the business model, like moving from retail business to wholesale business, break-even analysis works. This research would assist the business to decide if the selling price of a commodity needs to adjust.

Although breaking even might not sound like much of a business objective, for your financial people it is a significant guide. For long-term planning, your break-even points include essential benchmarks. Knowing your break-even will help you with pricing, debt service and other functions of running your company for areas such as revenue, development, operations and investment payback.

There are many Break Even Analysis in Excel Template available online that you can use for your business. Companies like eFinancialModels provides excellent, flexible and powerful excel templates that can surely adapt to your needs and bring effective results.