Financial Ratio Analysis & Breakeven Model Templates
Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a company’s financial statements to make better economic decisions. These statements include the income statement, balance sheet, statement of cash flows, and a statement of changes in equity. Financial statement analysis is a method or process involving specific techniques for evaluating risks, performance, financial health, and future prospects of an organization.
Ratio analysis is a useful tool for benchmarking the financial and operational efficiency of a project or company compared with others. In project management, a ratio analysis may be related to the efficiency of a project and how well the project managers are controlling resources. Financial ratios in the corporate setting usually come from a company’s balance sheet and income statement. These are typically used to determine a company’s financial health relative to industry benchmarks, but they can also be used to maintain financial control of specific projects by assessing their financial health. Recognizing the importance of ratios and ratio analysis in financial assessment and project control, one must take advantage of proven financial ratio analysis templates.
The break-even point (BEP) in economics, business—and specifically cost accounting—is the point at which total cost and total revenue are equal. There is no net loss or gain, and one has “broken even,” though opportunity costs have been paid and capital has received the risk-adjusted, expected return. In short, all costs that must be paid are paid, and there is neither profit nor loss. Breakeven model templates can be very complex or simple depending on the extensiveness of the financial investment.
The break-even point is one of the simplest, yet least-used analytical tools. Identifying a break-even point helps provide a dynamic view of the relationships between sales, costs, and profits. For example, expressing break-even sales as a percentage of actual sales can help managers understand when to expect to break even (by linking the percent to when in the week or month this percent of sales might occur).