ENTREPRENEURIAL PLANNING
FINANCIAL PLANNING AND ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which is a limitation of break-even?
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It does not help an investor to decide whether to fund a business
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It cannot show whether the business will make a profit or a loss
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Even fixed costs can vary in reality, especially in the long run
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Provides a target
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Explanation:
Detailed explanation-1: -Limitations of Break-Even Analysis Break-even analysis assumes that the fixed and variable costs remain constant over time. In reality, this is usually not the case. Costs may change due to factors such as inflation, changes in technology, or changes in market conditions.
Detailed explanation-2: -break-even assumes a business will sell all of the stock (of a particular product) at the same price. businesses can be unrealistic in their calculations. variable costs could change regularly, meaning the analysis could be inaccurate. they can be time consuming to create.
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