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The key factors to consider when determining the break-even point of a business include fixed costs, variable costs, and the selling price of the product or service. Fixed costs are expenses that do not change regardless of the level of production or sales, such as rent or salaries. Variable costs change with the level of production or sales, such as raw materials or direct labor costs. The selling price of the product or service is also crucial as it determines the revenue per unit sold. The break-even point is reached when total revenue equals total costs.
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In his article for Harvard Business Review, Baruch Lev – the Philip Bardes Professor of Accounting and Finance at the Stern School of Business in NYU, talks about proforma as one of the ways in which managers can impart useful information to investors. (For more like this, check out our book summary). Lev stresses that "research shows that proforma earnings statements prominently displayed in the headline or first paragraph of a company's news release have a much stronger impact on stock prices than proforma earnings reported elsewhere in the document."
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How to effectively show the investment and reward opportunities of a new venture or project? Use our "Ultimate Startup Pro Forma" model to showcase a ...
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