Essay On Break Even Analysis

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Project Management The four techniques used for analyzing the costs and benefits of a proposed system is break-even analysis, payback analysis, cash-flow analysis, and present value analysis. Break-even analysis is a supply-side analysis. Only the costs of the sales is analyze with break-even. It does not analyze how demand may be affected at different price levels. A strength of break-even analysis it’s relatively simple concept and the formula can be easily understood and used by most people. Another strength is that it provides vital information when making a decision. Weaknesses of break-even analysis is it assumes that all output will be sold. It is difficult to apply break-even analysis when a company sells more than one product. Break-even cannot show what will definitely happen. The payback analysis method is the simplest analysis method to use when looking at one or more major project options. It tells you how long it will takes to earn back the money you will spend on the project. Payback analysis helps you decide you whether or not you should undertake the project. The biggest strength of the payback method is that it is simple. The payback analysis method is used to make quick evaluations of projects. Weaknesses of the payback method is that the method ignores the time value of money. The payback analysis method does not consider cash inflows from a project that may occur after the initial investment has been recovered. A cash flow analysis is a listing of the flows of cash into and out of the project. This is like your checking account at your bank. Deposits are the cash inflows and withdrawals are the cash outflows. The balance in your checking account is your net cash flow at a specific point in time... ... middle of paper ... .../04/top-10-qualities-of-a-project-manager/ Work Breakdown Structure (WBS) in Project Management Definition & Resources. (n.d.). Work Breakdown Structure (WBS) in Project Management Definition & Resources. Retrieved April 11, 2014, from http://glossary.tenrox.com/Work-Breakdown-Structure.htm PERT chart (Program Evaluation Review Technique). (n.d.). What is ?. Retrieved April 11, 2014, from http://searchsoftwarequality.techtarget.com/definition/PERT-chart Payback Period. (n.d.). Investopedia. Retrieved April 11, 2014, from http://www.investopedia.com/terms/p/paybackperiod.asp Present Value - PV. (n.d.). Investopedia. Retrieved April 11, 2014, from http://www.investopedia.com/terms/p/presentvalue.asp Understanding Cash Flow Analysis. (n.d.). Understanding Cash Flow Analysis. Retrieved April 11, 2014, from https://www.extension.iastate.edu/agdm/wholefarm/html/c3-14.html

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