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How To Do Break-Even Analysis In Excel?
Businesses employ break−even analysis to estimate the point at which their revenue equals their costs, resulting in neither profit nor loss. It is a fundamental concept in financial management and can provide important insights into the financial viability of a company or a specific product/service. In this article, we'll walk you through the step−by−step process of completing a break−even analysis in Microsoft Excel, one of the most popular spreadsheet programmes. Excel has a number of powerful tools and features that make it an excellent tool for financial analysis, including break−even analysis.
This video will provide you with the information and abilities to perform break−even analysis efficiently, whether you are an entrepreneur wanting to launch a new company, a small business owner evaluating the profitability of a product line, or a student studying finance or accounting. So, let's get started and learn how to use the power of Excel to do break−even analysis, which will provide you with vital insights into the financial health and profitability of your firm!
Do Break−Even Analysis
Here we will first use the formulas, then use the goal−seeking function to complete the task. So let us see a simple process to see how you can do break−even analysis in Excel.
Step 1
Consider an Excel sheet where the data in the sheet is similar to the below image.
First, enter the formula as =B1*B2, =B2*B4, and =B3−B5−B6 in the B3, B5, and B7 formulas, respectively.
Empty cell > Formula > Enter.
Step 2
Then click on data, then click on goal seek under what if analysis.
Data > What−if Analysis > Goal Seek.
Step 3
Then enter Set cell as the profit cell location, i.e., $B$7, To value as 0, and By changing the cell to a unit price cell, i.e., cell $B$1, and clicking OK to complete the task,
Set cell > To value > By changing cell > Ok.
Conclusion
In this tutorial, we have used a simple example to demonstrate how you can do break−even analysis in Excel to highlight a particular set of data.
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