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Break-Even Sensitivity to Key Management Actions

Break-even (B/E) analysis helps to understand how sensitive is the time to reach B/E with respect to management actions, such as, changes in prices, or market share (quantities sold) or reduction in costs.

Shareholders and investors are interested to know how effective management actions to break even sooner than later, as it has a direct impact on, both, profitability and liquidity.

To appreciate how to measure the elasticity of B/E with respect to different management actions the following financial simulations are applied:

1. B/E in the baseline scenario.

In the Business Game > Dynamic Analysis > B/E graphs it can be seen that in the baseline scenario above B/E happens at the end of Y3.

2. In the case of management action “Increase of Unit Prices in Y1 and Y2” we will look at two cases: unit prices of 40,000 and unit prices of 50,000 in Y1 and Y2.

2.1 Increase Unit Price to 40,000 in Y1 and 

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