Why is it important for an entrepreneur to do a break-even analysis? State any two points.

Question

Accepted Answer

Break-even analysis helps the entrepreneur in the following ways: 1. It helps in setting profit goals and sales targets.

2. It helps in determining the products that are not contributing to meet the fixed expenses.

3. It is a useful technique for determining how many units must be sold or how much sales volume must be achieved in order to break-even.

4. It helps to indicate the volume of sales needed to cover total variable and fixed expenses by the new enterprise.