Essay: Breakeven Analysis-A Useful Tool

Sample Essay

Break-even analysis is very useful tool in all business operations. Although it has the disadvantages brought about by the assumptions made, it has its own advantages as well. The disadvantages are the assumptions that everything produced is sold and at the same price. However, the advantages which make it useful and each of the firm is advised to use it are that it is cheap and it helps a firm acquire a loan.

With its relationship of returns, volume, production and cost shown, the firm will be able to make decisions on whether to take some business ventures or to leave them (Accountingformanagement.com, 2009). With the use of a break even analysis, it is very easy to determine whether a firm is on the best track of doing business without making profits or losses.

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