*This is an AI generated summary. There may be inaccuracies.*

Summarize another video · Purchase summarize.tech Premium

The point of equilibrium is the point at which expenses equal income. This video explains how to calculate the point of equilibrium for a company, which is essential for any business. Through it, we can determine the level of sales necessary to maintain the company in a profitable state in response to the risk associated with investment made. Additionally, it is an strategic tool used to determine the company's solvency if revenues are projected to reach the planned equilibrium level.

**00:00:00**In this video, we discuss the point of equilibrium in business costs. The point of equilibrium is the point at which expenses equal income. By measuring activity in terms of sales volumes, it allows businesses to determine when they begin to generate profits. Knowing if your project is viable starts with determining market demand is greater than your point of equilibrium. Additionally, knowing in what sales volume you can transform a variable cost into a fixed cost or vice versa can be done, for example, by paying commissions to sellers versus paying a fixed salary. Next, we'll discuss the calculation steps for the subsequent analysis. First, we must define company costs including production, sales, and administration expenses. We will exclude financial costs such as interest on loans and taxes. Second, we will separate total costs into variable and fixed costs. Third, we will calculate the cost variable unit price by dividing total fixed costs by the number of produced units. Finally, we will apply the equilibrium equation, where the point of equilibrium is equal to the fixed cost divided by the margin of profitability unit. This margin of profitability unit will be determined by the difference between the selling price and the cost variable unit price. Once we have determined the point of equilibrium in units, it will be different for each product in the company depending**00:05:00**This video explains how to calculate the point of equilibrium for a company, which is essential for any business. Through it, we can determine the level of sales necessary to maintain the company in a profitable state in response to the risk associated with investment made. Additionally, it is an strategic tool used to determine the company's solvency if revenues are projected to reach the planned equilibrium level. If projected, the company will be solvent. If not, there will be liquidity problems and the company will need to borrow to cover fixed costs first, and then variable costs. Thank you and have a good day.

Copyright © 2024 Summarize, LLC. All rights reserved. · Terms of Service · Privacy Policy · As an Amazon Associate, summarize.tech earns from qualifying purchases.