Rohit Shetty stated leader shoe business with his brother. Both were very excited about the new venture. With meticulous planning and a lot of hard work they were able to sell 700 pairs of shoes in the first year. But they did not earn any profit. Both were happy because they were not at loss and revenue generated was equal to the cost. Now they were moving towards earning profit in the second year.
(a) Identify the component of financial plan discussed above. (b) By giving any four points state how this component is useful for the entrepreneur?

Question

Rohit Shetty stated leader shoe business with his brother. Both were very excited about the new venture. With meticulous planning and a lot of hard work they were able to sell 700 pairs of shoes in the first year. But they did not earn any profit. Both were happy because they were not at loss and revenue generated was equal to the cost. Now they were moving towards earning profit in the second year.

(a) Identify the component of financial plan discussed above. (b) By giving any four points state how this component is useful for the entrepreneur?

Accepted Answer

(a) Break-even point (Break-even Analysis). (b) Four ways it is useful: (i) It helps in assessing the minimum level of output to be produced. (ii) It helps in determining the effect of change in quantity of output upon the profits. (iii) It helps in setting the selling price of the product. (iv) It helps in identifying the profitable options in line of production.