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FEDERAL AGENCY FOR EDUCATION
State educational institution higher professional education
"STATE UNIVERSITY OF MANAGEMENT"
Distance Learning Institute
by discipline " Crisis management enterprise finance"
topic: "The general scheme for calculating the break-even threshold and the financial safety margin of a crisis organization"
Moscow, 2010
Introduction
Break even analysis
Breakeven threshold
Margin of financial strength
Operating lever, the force of its impact
Conclusion
Literature
Introduction
By selling the created products, the organization (legally independent enterprise) reimburses the costs of production, which form the cost of production, and receives cash savings - profit, and in a number of industries, turnover tax.
Profit at modern conditions is not only an indicator of the performance of an individual enterprise (organization), but It also has an important national economic significance, tk. profit is one of the most important sources of accumulation and replenishment of the revenue part of the state and local budgets.
Profit in market conditions is not used for consumption, but for investments and innovations that ensure the economic growth of the enterprise and its competitiveness.
The amount of profit depends on the production, supply, marketing and financial activities of the enterprise.
The most important indicator reflecting the final financial results of the enterprise is profitability (profitability). Profitability characterizes the profit received from 1 rub. funds invested in financial transactions or in other enterprises.
When analyzing financial stability It is very important to know the break-even level of the enterprise. That is, it is extremely important to determine the state current activities an enterprise in which its current income from the sale of products (works, services) exceeds the total cost of production and sales of products. The main component of the break-even analysis is the determination of the "break-even threshold", as well as the "margin of financial strength", in other words, a kind of "safety edge", which shows how much it is possible to reduce the volume of production without incurring losses.
In this paper, we will try to consider in more detail the analysis of the break-even activity of the organization, calculate the "break-even threshold" and determine the "margin of financial safety", which is necessary to determine how much it is possible to reduce the sale (production) of products without incurring losses.
break even financial crisis products
1. Break-even analysis
There is a certain mutual influence and interdependence between costs, production volume and profit. It is known that, all other things being equal, the growth rate of profits always outstrips the growth rate of revenue. With an increase in the volume of sales of products, the share of fixed costs in the structure of the cost of production decreases and the "effect of additional profit" appears.
Break-even analysis (CVP analysis) is now widely used to determine:
· critical volume of production for break-even work;
dependencies financial result from changes in one of the elements of the ratio;
stock of financial strength of the enterprise;
assessments production risk;
feasibility of own production or purchase;
the minimum contract price for a certain period;
planning profit from sales, etc.
The breakeven analysis is based on a number of assumptions.
First, costs can be divided into fixed and variable.
Fixed and variable costs
Currently, we can talk about three types of accounting in enterprises: accounting, tax and management. At the same time, the differences between the results of accounting and tax accounting are increasing. In the Concept of reforming enterprises and other commercial organizations, approved by Decree of the Government of the Russian Federation of October 30, 1997 No. 1373, it was noted that the subordination of the accounting system to taxation purposes distorts the real picture of the financial and economic condition of the enterprise, the ratio of income and expenses, leads to the taxation of fictitious profits arising from the sale of products at a price below cost, as well as to the distortion of economic and marketing information and, as a result, to the difficulty of making managerial decisions.
Management accounting, which is gradually being introduced to Russian enterprises, gives an absolutely real idea to the enterprise about its costs and results based on the analysis; allows you to get rid of unreasonable costs, create incentive systems for remuneration, choose the best option for management decisions.
Management accounting is associated with the methods of including costs in the cost of production and cost accounting according to the "director-costing" system, as well as with the analysis of the relationship "cost-revenue-profit" (cost-volume-profit). According to the first three letters of English words, the method of studying this relationship was called CVP.
In our practice, this relationship is primarily expressed by the following relationship:
Pr \u003d B - Cn,
where Pr - profit from the sale; B - sales revenue; Сn -- full cost of goods sold.
There are two main methods for including costs in the cost of production. In the first of them, the costs are divided into direct and indirect (overhead costs), the full cost of each type of product or service is determined.
In the second method, costs are divided into variable and fixed.
The differences between the first method and the second are as follows.
1. The division of costs into direct and indirect is carried out depending on how they are included in the unit cost of production: direct costs - directly, and indirect - as a percentage of a certain base. The division of costs into variable and fixed depends on their behavior, i.e. volatility in relation to changes in production volumes and product sales.
2. In the second method, an incomplete, limited cost per unit of output is determined based on variable costs. Fixed costs are not included in the cost of a unit of production, but are included in the total amount in the cost of the entire volume of output.
The above approach makes it possible to significantly expand the analytical capabilities of the second method. In addition, it gives a real idea of the profitability of certain types of products, works, services.
The advantages of the first method are related to the fact that all costs per unit of output are actually determined according to the plan. This makes it possible to solve some management tasks based on the development of relevant norms and standards. But at the same time, the inclusion of indirect (overhead) costs in the unit cost of production distorts information about the profitability of individual orders. In addition, prices determined on the basis of full unit costs are not flexible enough.
Variable costs are costs that directly depend on the volume of production and change in proportion to its change.
Of course, such factors as increasing labor productivity, applying overtime work, can make a horizontal line of variable costs inclined in one direction or another.
Fixed costs generally do not depend on changes in the volume of production. But these costs per unit of output decrease with an increase in production volume, and increase with its decrease.
In the same time fixed costs can be unchanged up to a certain point, after which they must be increased at a time. And if the volume of production is constantly growing, fixed costs periodically increase.
Individual costs rise with an increase in production, but not in proportion to its growth, but in a smaller volume. Such costs are called permanently variable. These include the costs of electricity, heating, telephone, repair of fixed assets, etc. The current costs that ensure the life of the enterprise are a constant component of constant-variable costs, and the costs associated with the development of production are a variable component.
2. Breakeven threshold
The main component of the break-even analysis is the determination of the "break-even point" ("break-even threshold", "dead point").
The break-even point corresponds to such a minimum sales volume at which the revenue covers all the costs of the enterprise associated with the production and sale of products.
As noted in the previous chapter of the work, to determine the "break-even point", regardless of the methodology used, it is necessary first of all to divide the projected costs into fixed and variable. The practical benefit of the proposed division of costs into fixed and variable costs (the amount of mixed costs can be neglected or proportionally attributed to fixed and variable costs) is as follows: then it should stop producing).
Secondly, it is possible to solve the problem of profit maximization and rationalization of its dynamics with the given parameters of the firm due to the relative reduction of certain costs. Thirdly, such a division of costs allows us to determine the minimum volume of production and sales of products at which the business breaks even (profitability threshold) and to show how much the actual volume of production exceeds this indicator (the financial safety margin of the company). The threshold of profitability is defined as the proceeds from the sale, at which the company no longer has losses, but does not receive any profit, that is, the financial resources from the sale after reimbursement of variable costs are only enough to cover fixed costs and the profit is zero. The break-even point in physical terms for the production and sale of a specific product (Tb) is determined by the ratio of all fixed costs for the production and sale of a specific product (Bpost) to the difference between the price (revenue) (P) and variable costs per unit of product.
When calculating the break-even point, it should be taken into account that in the linear dependence model, there can be one break-even point, while in practice the cost function is non-linear and can cross the line of production volumes in several places. Therefore, the analysis must accurately delineate the limits of growth in production volumes when the assumptions of a linear nature of the relationship are justified by production conditions.
Or in monetary terms:
Bmin = F/(1-in),
where Q is the number of units of production;
R -- the price of a unit of production;
F - fixed costs;
V - variable costs;
a - the value of variable costs in the price of a unit of production;
in -- the share of variable costs in the base revenue.
The amount of profit with the planned volumes of production and sales will be equal to:
P \u003d P x Q - F-a x Q.
Let us introduce the notation:
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sales revenue. |
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sales volume in physical terms. |
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variable costs. |
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fixed costs. |
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price per piece |
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average variable costs (per unit of output). |
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break-even point in monetary terms. |
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break-even point in physical terms. |
The formula for calculating the break-even point in monetary terms:
Tbd \u003d V * Zpost / (V - Zper)
The formula for calculating the break-even point in physical terms (in pieces of products or goods):
Tbn \u003d Zpost / (C - ZSper)
At the break-even point, the income line crosses and goes above the line of total (gross) costs, the profit line crosses 0 - it moves from the loss zone to the profit zone.
3. Margin of financial strength
How far the company is from the break-even point shows the margin of financial strength. This is the difference between the actual output and the output at the break-even point. Often calculated as a percentage of the margin of financial strength to the actual volume. This value shows by how many percent the volume of sales can decrease so that the company can avoid a loss.
Margin of financial strength = Revenue - Threshold of profitability The margin of financial strength of an enterprise is the most important indicator of the degree of financial stability. The calculation of this indicator makes it possible to assess the possibility of an additional reduction in revenue from sales of products within the break-even point. In practice, there are three situations that will affect the amount of profit and the financial strength of the enterprise in different ways: 1) the volume of sales coincides with the volume of production; 2) the volume of sales is less than the volume of production; 3) the volume of sales is greater than the volume of production. Both the profit and the margin of financial safety obtained with an excess of production are less than with the corresponding volume of sales to the volume of production. Therefore, an enterprise interested in improving both its financial stability and financial results should strengthen control over production volume planning. In most cases, an increase in the inventory of an enterprise indicates an excess of production. Directly about its excess is evidenced by an increase in reserves in part finished products, indirectly - an increase in stocks of raw materials and source materials, since the company bears the costs for them already when they are purchased. A sharp increase in inventories may indicate an increase in production in the near future, which should also be subject to strict business case. Thus, if an increase in the company's reserves is detected in the reporting period, it can be concluded that it affects the value of the financial result and the level of financial stability. Therefore, in order to reliably measure the value of the financial safety margin, it is necessary to correct the sales proceeds indicator by the amount of the increase in the company's inventory for reporting period. In the last version of the ratios - with a sales volume greater than the volume of production - the profit and the financial safety margin are greater than with the standard construction. However, the fact of the sale of products that have not yet been produced, that is, in fact, does not yet exist at the moment (for example, with an advance payment for a large batch of goods that cannot be produced for the current reporting period), imposes additional obligations on the enterprise that must be fulfilled in future. There is an internal factor that reduces the actual value of the financial safety margin - this is hidden financial instability. A sign that an enterprise has hidden financial instability is a sharp change in the volume of stocks. So, to measure the financial strength of an enterprise, the following steps must be taken: 1) calculation of the financial strength; 2) analysis of the impact of the difference in sales volume and production volume through the correction of the value of the financial safety margin, taking into account the increase in the inventory of the enterprise; 3) calculation of the optimal increase in the volume of sales and the limiter of the financial safety margin. The margin of financial strength, calculated and adjusted, is an important comprehensive indicator of the financial stability of an enterprise, which must be used in predicting and ensuring the comprehensive financial stability of an enterprise.
Let us introduce the notation:
The formula for the margin of financial strength in monetary terms:
ZPd \u003d (B - Tbd) / B * 100%,
where ZPd is a margin of financial strength in monetary terms.
The formula for the margin of financial strength in physical terms:
ZPn \u003d (Rn - Tbn) / Rn * 100%
where ZPn is a margin of financial strength in physical terms.
Margin of safety changes rapidly near the break-even point and slower as you move away from it. good performance the nature of this change can be obtained by plotting the dependence of the margin of safety on the volume of sales.
As you can see in the graph, for a sales volume of 40 pieces, the financial safety margin is 50%, i.e. if the sale decreases by 20 pieces, we will be at the break-even point.
Margin of safety is a more objective characteristic than the break-even point. For example, breakeven points small shop and a large supermarket can differ thousands of times, and only the margin of financial strength will show which of the enterprises is more stable.
4. Operating lever, the force of its impact
Operating lever -- potential opportunity influence profit by changing the cost structure and the volume of output and sales of products.
The higher the share of semi-fixed costs in the cost of production, the stronger the impact operating lever. The strength of the operating leverage is calculated as the ratio of marginal profit to profit from sales. Marginal profit is calculated as the difference between the proceeds from the sale of products and the total amount of variable costs for the entire volume of production. Profit from sales is calculated as the difference between the proceeds from the sale of products and the total amount of fixed and variable costs for the entire volume of production. Thus, the size of financial strength shows that the company has a margin of financial stability, and hence profit. But the lower the difference between revenue and profitability threshold, the greater the risk of losses. So:
· force of influence of the operational lever depends on the relative size of fixed expenses;
The strength of the impact of the operating lever is directly related to the growth in the volume of sales;
The force of the impact of the operating lever is the higher, the closer the enterprise is to the threshold of profitability;
The strength of the impact of the operating lever depends on the level of capital intensity;
The force of the operating lever is the stronger, the less profit and more fixed costs.
Let us introduce the notation
The price operating leverage is calculated by the formula:
Rts \u003d (P + Zper + Zpost) / P \u003d 1 + Zper / P + Zpost / P
Natural operating leverage is calculated by the formula:
Rn \u003d (V-Zper) / P
Considering that B \u003d P + Zper + Zpost, we can write:
Rn \u003d (P + Zpost) / P \u003d 1 + Zpost / P
Comparing the formulas for operating leverage in price and physical terms, it can be seen that Рн has less influence. This is explained by the fact that with an increase in natural volumes, variable costs simultaneously grow, and with a decrease, they decrease, which leads to a slower increase / decrease in profit.
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sales revenue. |
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sales profit. |
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variable costs. |
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fixed costs. |
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price operating leverage. |
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natural operating lever. |
Thus: If the price increases by 1%, the profit will increase by 12%. If volumes increase by 1%, profit will increase by 6%.
At the same time, we must not forget that the operating lever also operates "in the opposite direction":
If the price decreases by 1%, the profit will decrease by 12%. With a decrease in volumes by 1%, profit will decrease by 6%.
Conclusion
Enterprise finance, being part of common system financial relations, reflect the process of formation, distribution and use of income at enterprises of various sectors of the national economy and are closely related to entrepreneurship, since an enterprise is a form of entrepreneurial activity.
The purpose of the financial stability assessment is to document financial statements consider the financial condition of the enterprise in terms of its financial independence from external sources.
Having considered in this paper the analysis of the break-even of the enterprise and its main components, we can conclude that the break-even threshold, the margin of financial strength and the operational focus, all these indicators of financial stability allow not only to assess one of the aspects of the financial condition of the enterprise. With proper use of them, you can actively influence the level of financial stability, increase it to the minimum required, and if it actually exceeds the minimum required level, - use this situation to improve the structure of assets and liabilities.
Grade financial position The company needs the following people:
1) investors who need to make a decision on the formation of a portfolio of securities;
2) creditors, who must be sure that they will be paid;
3) auditors who need to recognize the financial tricks of their clients;
4) financial executives who want to realistically assess the performance and financial condition of their firm;
5) Marketing executives who want to create a go-to-market strategy.
It should also be noted once again that the analysis of the financial condition of an enterprise serves not only as a means of attracting business partners, but also as a basis for making a management decision.
As a final result, the analysis of the financial position of the enterprise should give the management of the enterprise a picture of its actual state, and for persons not directly working at this enterprise, but interested in its financial condition - the information necessary for an impartial judgment, for example, on the rationality of using additional investments invested in the enterprise etc.
Literature
1. Kokhno P.A. / Mikryukov V.A./ Komorov S.E. Management. - M.: Finance and statistics, 1993.
2.A.A. Volodin and others - M: INFRA - M, 2004. - 504 p. -(Higher education)
3. Berdnikova T.B. Analysis and diagnostics of financial and economic activity of the enterprise: Textbook. - M.: INFRA-M, 2001.- 215p. - (Series "Higher education")
4. www.finances-analysis.ru
5. Pavlova L.N. Enterprise finance: a textbook for universities. - M.: Finance, UNITI, 1998.
6. D.V. Reut, Yu.N. Beads " Comparative analysis options investment project and management of project parameters". M.: MSTU named after N.E. Bauman, 2008.
7. N.M. Mukhetdinov and V.E. Korolkov "Investments and investment design". M.: Mobile, 2002.
8. V.P. Popkov, V.P. Semenov "Organization and financing of investments". St. Petersburg: Peter, 2001. Exchange activity(Under the editorship of A.G. Gryaznova) M: "Finance and statistics", 1996
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Break-even is controlled by the break-even point (self-sufficiency, profitability, equilibrium).
Profitability threshold - the ratio of the amount of fixed costs as part of the cost of goods sold to the share of marginal income in revenue:
If the threshold of profitability is known, then it is not difficult to calculate the margin of financial stability (FSF):
The break-even point (“profitability threshold”, “dead point”) is the volume of sales at which the revenue covers all the costs of the enterprise associated with the production and sale of products.
Three methods are used to calculate the break-even point:
1. With the graphical method, finding the break-even point is reduced to building a comprehensive schedule of "costs - production volume - profit". To find the break-even point, the amount of total costs (fixed (FC) and variable (VC)) is calculated. A direct TS is plotted on the graph corresponding to this value. Then any point on the x-axis is selected and for it the amount of sales proceeds is found. A straight line (TR) is constructed corresponding to the given value. The break-even point (profitability threshold) shown in the figure is the intersection point of the gross revenue and total costs graphs (A). At the break-even point, the revenue received by the enterprise is equal to its total costs
2. The method of equations is based on the calculation of the profit of the enterprise by the following formula:
Revenue - Variable Costs - Fixed Costs = Profit
Detailing the procedure for calculating the indicators of this formula for calculating the break-even point, it can be represented as follows:
EBIT= Р*Х- YVC*X- FC = 0
EBIT=0 - the minimum sales volume covering the costs of production and sales, i.e. the break-even point, in units of production;
EBIT - earnings before interest and taxes;
P is the price of a unit of production;
YVC - variable costs per unit of output;
FC - fixed costs;
X is the threshold volume of production (the number of units of production).
From the formula we calculate the threshold volume of production.
or in terms of money:
VC = FC / (1-v)
v is the share of variable costs in the base revenue.
The amount of profit with the planned volumes of production and sales will be equal to:
EBIT =P*X – FC – YVC *X
3. A variation of the method of equations is the marginal income method, which is based on marginal profit.
Specific marginal profit (GMgm) is a derived indicator that characterizes the amount of marginal profit in the price of a unit of production:
GMgm - specific marginal profit.
The marginal profit ratio is the ratio of marginal profit to sales revenue. It shows what share of the proceeds from sales is used to cover fixed costs and generate profits. The marginal profit ratio is calculated as the share of marginal profit in sales proceeds (S):
Marginal margin of safety (MZP)- this is a value showing the excess of the actual proceeds from the sale of products (works, services) over the threshold, ensuring break-even sales. This indicator is determined by the following formula:
MZP \u003d (Vf - Vp) * 100 / Vf
Vf - actual revenue;
Vp - threshold revenue.
The higher the margin of safety, the better for the enterprise.
Margin of financial strength is defined as the ratio of the difference between the current sales volume and the sales volume at the break-even point to the current sales volume, expressed as a percentage. Financial safety margin (FFR) is defined as:
Production leverage shows the degree of influence of fixed costs on profits (losses) with changes in production volume.
Production leverage (LP) can be represented as follows:
Lpr \u003d (V - VC) / P \u003d (FC + P) / P
P - balance sheet profit from sales (before income tax, interest on loans and dividends);
B - sales proceeds;
VC - variable costs;
FC - fixed costs.
Analysis of the volume of output and sales of products is part of the on-farm financial analysis and is carried out in order to identify reserves to strengthen the financial condition of the organization.
Of great importance in predicting the financial position of an organization is the assessment of actual output and sales within the limits of production capacity, i.e. within the boundaries of the "minimum - maximum" volume of production. Comparison with a minimum, break-even volume allows you to assess the degree, or zone, of the "security" of the organization and, if its value is negative, remove it from production certain types products, change production conditions and thereby reduce costs or stop production.
These provisions follow from the curve life cycle organization (product), presented in fig. 1.11. On this curve, there are two break-even points, one of which characterizes the transition from the stage of "birth" to "youth" (point A), and the second, in fact, shows the boundary of the organization's life cycle, the transition beyond which indicates its insolvency.
Consider a graphical display of the model "costs - production volume - sales volume (revenue)". Let us first analyze the change in costs (cost) when increasing production volumes.
Increasing production volumes is possible with its automation (innovative way of development). According to experts, the effect of production automation mainly (by 60-70%) consists in increasing the level of equipment use, by 15-20% it is explained by an increase or stabilization of product quality, or by only 10-15% - by saving wages. According to available data, the loading of equipment used in flexible automated complexes increases by 2 times, and the shift ratio reaches 2, in flexible automated production, the shift ratio can approach 3.
The cost of a unit of production before reaching the optimal production capacity will decrease to point A in Fig. 4.10, which is consistent with the ^-shaped curve in fig. 1.12. To increase output, additional capital investments, which will cause an increase in depreciation charges or the cost of repairing equipment and maintaining required quality products (the area to the right of point A).
Rice. 4.10.
Assumption in cost change (see Figure 4.10):
- ? the rate of change in depreciation charges begins to grow beyond the maximum production load for equipment of one principle of operation;
- ? material costs per unit of production with the growth of production automation are reduced (waste is reduced, material cutting is improved);
- ? wage per unit of product decreases with the growth of labor productivity;
- ? when calculating for the short term within one year, a linear relationship between the cost price, output volume and capital investments is assumed.
AT study guide Ya. V. Sokolova stated: “The administrator must distinguish at least six models of functional dependence.
A. Costs are rising, but somewhat slower than output, i.e. the more finished products sold, the greater the relative cost savings. Production is becoming more and more profitable.
B. Costs rise faster than output, i.e. the larger the volume of products sold, the relatively higher the cost. Manufacturing tends to become unprofitable.
C. Up to a certain limit, costs are fixed, after which they are directly proportional to the volume of products sold.
D. Costs rise in direct proportion to the volume of production. The main cost category for direct costing.
E. Costs are fixed and do not change with the volume of production.
F. Costs rise in leaps as output increases.
G. Costs decrease as output increases.
H. Costs rise in leaps and bounds in proportion to the increase in output. Moreover, the growth rate increases with each segment of costs.
Comparison of the output achieved with the maximum output determined by the production potential of the organization allows you to assess the possibility of increasing profits with an increase in production volumes if demand or market share of the organization increases.
In the analysis of the financial condition, both retrospective and prospective analysis is important, allowing you to justify the plan.
production and sales of products.
A prospective analysis of product output is carried out in parallel with an analysis of market conditions and the organization's need for production resources.
Break-even analysis assumes:
- ? comparison of break-even volume for several periods (or comparison with the plan);
- ? assessment of the degree of security of the organization in dynamics;
- ? quantification the influence of factors on the break-even volume of production;
- ? calculation of the planned production volume for a given amount of planned (expected) profit.
The break-even (critical) volume of production is calculated from an equation based on the equality of revenue from sales of products and the sum of constants and variable costs, which follows from the definition of break-even:
where w is the price of a unit of production;
q- the number of units of manufactured (sold) products;
5 "‘ kg - fixed costs in the cost per unit of production;
S "cp - variable costs in the cost per unit of output.
Graphical interpretation of the break-even point is shown in fig. 4.11.
From this figure it can be seen that the break-even volume of output is achieved when the total amount of expenses and revenue (income) from sales are equal, or when marginal income is equal (D) and variable costs (^ per). Marginal income, or gross margin, refers to income after covering variable expenses.
Breakeven (critical) volume can be calculated in several ways.
1. Minimum volume of output in physical terms: For example,
The minimum allowable output will be:
2. To calculate the volume of output in value terms, the left and right parts of the expression are multiplied by the price (rubles):
where q x co = Np- sales revenue without VAT;
Rice. 4.11.
- - specific variable costs or the share of variable costs in the price of the product.
- 3. Critical sales volume can be calculated using marginal revenue. Marginal income (Z)) is defined as the difference between revenue and variable costs, i.e. it must cover the fixed costs of the organization and ensure profit from the sale of products (works, services):
where and- marginal income.
If the production is diversified, the average indicators of price, variable costs, marginal income are used in calculating the critical volume:
In this case, the effect of structural shifts on the breakeven volume can be calculated (see the calculation presented in Table 4.12).
4. To determine the impact of structural shifts on the critical volume of production (sales), the following expression is used:
where %. - specific gravity each type of product in total.
The concept of "margin of financial strength" is closely related to the concept of "break-even volume". Margin of financial strength(safety zone) (DA ^ 3 p) is the difference between the actual and break-even volumes.
Consider the procedure for calculating indicators using an example (Table 4.12).
Table 4.12
Calculation of the critical volume of the safety zone
The financial strength of the organization increased by 441 thousand rubles. with an increase in revenue by 1000 thousand rubles. This indicator was negatively affected by an increase in the critical volume by 559 thousand rubles.
Example. Using factor analysis (method of chain substitution), we determine the influence of each factor on the change in the breakeven sales volume. Factor model:
Total influence: 1735 - 1176 = 559 (thousand rubles).
An increase in the critical volume point is explained by a decrease in the share of marginal income in the price, i.e. growth of specific variable costs.
The dependence of the volume of output and sales of products on the ratio of costs and sales price is used to justify the planned targets. If fixed and variable costs per unit of output (or specific variable costs) are known, as well as the amount of planned profit, then the required sales volume is determined by the formula
where /)PL is the planned amount of profit, or according to the formula:
Significantly increased attention to the definition of the break-even point in a crisis, ie. when sales fall. Knowing the break-even volume of sales (production) will allow you to predict the financial strategy for the development of the organization.
breakeven- the result of the activities of a company, firm or individual, in which incomes exceed expenses or are equal to each other. In order to determine the volume of production at which the expenses of the enterprise are covered, a break-even analysis is carried out. Also this analysis is carried out in order to identify the optimal volume of production for the enterprise and the pace of its development, which is important for ensuring the solvency and break-even of the enterprise.
Breakeven point- this is the sales revenue covering the sum of fixed and variable costs for given production volumes and the capacity utilization rate, and the profit is equal to 0. The break-even point can be calculated using 2 methods:
- - analytical
- - graphic
Analytical method for determining the break-even point:
1) calculation of marginal income - the result from the sale of products after reimbursement of variable costs:
Marginal Income = Sales Volume – Variable Costs
- 2) calculation of the marginal income ratio: To MD = Marginal income / Percentage of sales
- 3) the break-even point can be calculated both in value terms (rubles) and in physical terms (pieces):
TBCOST = Fixed Costs / Marginal Income Ratio
TBNATUR = Fixed costs / Marginal income per unit of production
Knowing TB, it is not difficult to calculate the margin of financial stability. Margin of financial strength represents the difference between the actual level of sales and the critical sales volume, and expresses the value upon reaching which a decrease in revenue may begin and the company will incur losses. It is defined as a percentage of the expected sales volume: FRR = Planned Sales Revenue / Threshold Sales Revenue
The company begins to make a profit when the actual revenue exceeds the threshold. The greater this excess, the greater the margin of financial strength of the enterprise and the greater the amount of profit. The indicator of the financial safety margin is used to assess the production risk, i.e. losses associated with the structure of production costs.
The higher the financial strength indicator, the lower the risk of losses for the enterprise.
Sensitivity analysis involves tracking how profit changes in response to changes in one of the parameters, provided that the others remain unchanged. It is known that operating profit depends on the volume of sales, the cost of goods sold (works, services), the ratio of fixed and variable costs in the cost. Sensitivity analysis allows you to identify what will happen to profit if the sales volume decreases, for example, by 10%, or if the unit cost of production (works, services) decreases, or if variable costs amount to 60% of sales proceeds, etc.
With the graphic method the break-even point (profitability threshold) is found as follows: we find the value of fixed costs on the Y axis and plot the line of fixed costs on the chart, for which we draw a straight line parallel to the X axis; select any point on the X axis, i.e. any value of sales volume, we calculate the value of total costs (fixed and variable) for this volume. We build a straight line on the graph corresponding to this value; choose again any amount of sales on the x-axis and for it we find the amount of sales proceeds. We construct a straight line corresponding to this value. The break-even point on the chart is the point of intersection of the straight lines built by the value of total costs and gross revenue. At the break-even point, the revenue received by the enterprise is equal to its total costs, while the profit is zero. If the company sells products less than the threshold sales volume, then it suffers losses; if more, it makes a profit.
Break-even analysis is: 1. Calculation of the required volume of product sales, in which revenue is equal to gross costs, and profit is zero. 2. Calculation of sales growth, in which the influence of factors that reduce profits is offset by the influence of factors that increase profits. Break-even is the result of the activities of a company, firm or individual, in which income exceeds expenses or is equal to each other. Break-even analysis is now widely used to determine: the critical production volume for break-even operation; dependence of the financial result on changes in one of the elements of the ratio; stock of financial strength of the enterprise; production risk assessment; expediency of own production or purchase; minimum contract price for a certain period; profit planning, etc. Financial safety margin - the ratio of the difference between the current sales volume and the sales volume at the break-even point to the current sales volume, expressed as a percentage.
31. Essence of pricing at the enterprise, types of prices.
Price is the amount of money a buyer pays a seller in exchange for a product. Most often, enterprises with the help of a pricing strategy can achieve the following: goals A: 1. maintaining a stable position in the market; 2.expansion of market share; 3. profit maximization and increase in the level of profitability of sales; 4. maintaining and ensuring the solvency of the enterprise; 5. gaining leadership in the market; 6. Expansion of export opportunities of the enterprise. Depending on the field of application, the following main types of prices: 1.wholesale prices - used when selling products between legal entities. 2.purchasing prices are set for agricultural products purchased from agricultural producers. 3.retail prices - the prices at which goods are sold to the public. 4.estimated construction costs - are used in construction and installation works, their value is determined on the basis of estimated calculations and standard profit. 5. tariffs for services - like wholesale prices, they consist of cost and profit. 6..world prices are used in foreign trade. Distinguish between world prices for imported and exported products.
34. The relationship of revenue, costs and profits from the sale of products. The basic equation of microeconomics (economics at the enterprise level) can be represented as: Revenue \u003d fixed costs + variable costs + profit, Loss - or formalized: S= F+ V+ P, S-V=F+P, where the Difference (S-V) between revenue and total variable costs is called marginal income or gross margin. In particular, it depends on the volume of sales revenue (S), total variable costs (V) and profit (P). As you can see from the figure, with zero sales, revenue and variable costs are zero, but there are still fixed costs. Enterprises, selling products in a volume equal to Q min , has neither profit nor loss. It is at this value of the sales volume that the graphs S and C intersect. The point of intersection is called breakeven point.
36. 37. Functions and main types of profit. Factors influencing the amount of profit. AT economic system profit does the following functions A: 1.is an indicator of the efficiency of the enterprise; 2.has a stimulating function, tk. is the main element of the financial resources of the enterprise; 3.is a source of formation of budgets of various levels. Concepts (types) of profit: Gross profit - the amount of profit (loss) from the sale of products (works, services, property of the enterprise) and income from non-sales operations, reduced by the amount of expenses for these operations. Profit (loss) from the sale of products, works (services) is defined as the difference between the proceeds from sales without VAT and excises and the costs of production and sales, included in the s / s. Interrelation of indicators: V=P+R; P=V-R; R=V-P Profit before tax (balance sheet) - the final financial result reflected in the balance sheet of the enterprise and identified on the basis of accounting for all business operations of the enterprise and the assessment of balance sheet items. Taxable income – calculated as part of tax accounting (used to determine the taxable base). Net profit - profit remaining at the enterprise after payment of all taxes and used for the development of production and social needs.
38. The procedure for the formation, distribution and use of profits of the enterprise. The object of use is profit before tax. Under its division is understood the direction of profit to the budget and according to the articles of use for enterprises. Legislatively regulated only part of the organization's profits coming to the budget. The basic income tax rate is 24%. At enterprises, net profit is subject to distribution. The state does not directly intervene in the distribution process net profit, but through the provision of tax incentives, it can stimulate the allocation of resources for capital investments, charitable purposes, environmental activities, etc. The distribution of profits is regulated in the statutory documents. In accordance with the charter, funds are created: consumption, accumulation, social sphere. If funds are not formed, then for the purpose of planned spending of funds, estimates are made: for the development of production, social needs, material incentives for the employee, charitable purposes.
