Break even analysis

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Break even analysis

AdvantagesGetting StartedGetting Started

  • Helps to see if the investment is viable, expect to sell enough helicopter flights, otherwise there is little point in starting the venture.
  • Conduct "what if "scenario example: what if fuel costs rise
  • Show chart to bank or new shareholders in order to persuade them to inject finance into the firm needed to raise £1.58m

Disadvantages

  • If estimated costs are incorrect then the analysis is inaccurate and fairly worthless. Sheena has no entrepreneurial skills and this could make the estimated costs inaccurate.
  • Very difficult to estimate revenue , main rival competitor being based on same site.
  • Break even analysis is a simplistic model when there is a single product, however there are a variety of flight at different prices therefore it is difficult to use effectively.

Evaluation

Any firm should have an idea of its break even point, this is worthwhile since they have conducted thorough primary research to help with the accuracy of the data. The analysis may go some way to convince an investor or bank to inject finance into the project which requires £1.58m , break even analysis  can be used as part of a business plan. 

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