watch the stock markert carefully
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Respond to this main question
After reviewing breakeven analysis and payback periods, describe at least two examples of each. Why are these analyses important? Explain.
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Break even is where basically you have the same amount with a minor plus or minus. Two examples of this would be when one goes to a casino and they play twenty dollars at the slot machine and when they cash in their winnings, they receive nineteen fifty back. They really didn’t gain or lose anything. Another example would be my commute. Roughly it takes me forty five minutes to get to work but on some days it make take me a little longer or a little shorter depending on traffic. Break even to me is basically the average of whatever it is that you are doing.
Payback is soemthing completely different. Whereas with break even you may or may not see the big picture, with payback you can see okay this is there it is beneficial to me. An example would be investing in a house that you know within a certain amount of time you can sell it and receive some of the money that you invested into the house. Another example would be investing in stocks. If you watch the stock markert carefully, and if you have a major stock that is slow to rise, wait a while for it will be that one day where the stock wilt take a major hike upwards and you will reap the benefits of investing in that stock.
Both of these are important because one needs to know how to plan their monthly budgets and how to allocate what funds to where and how minimize when their business is not going so well.
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Break-even analysis determines the level of sales that generates neither profits nor losses and hence causes the firm to “break even.” Break-even analysis also permits management to see the effects on the level of profits of (1) fluctuations in sales, (2) fluctuations in costs, and (3) changes in fixed costs relative to variable costs. Break-even analysis is based on the following three mathematical relationships: the relationship between (1) output and total revenues (sales), (2) output and variable costs of production, and (3) output and fixed costs of production.
The payback period determines how long is required for an investment’s cash inflows to recover an investment’s cost (the initial cash outflow). If an investment costs $1,000 and the annual cash inflows are $250, the payback period is four years ($1,000/$250). If four years are an acceptable period of time to recover the initial cost, the investment is made. Notice that management must determinate what is an acceptable time period, and that determination may be subjective. The payback period may also be used to rank alternative investments. The more rapidly the initial cash outflow is recovered, the more preferred the investment. If four $1,000 investments have the following cash inflows: