Page 225 - DMGT409Basic Financial Management

Basic Financial Management

Notes You are required to calculate:

(i) P/V ratio

(ii) Profit where sales are ` 20,000
5. Draw a break even chart that will show contribution more clearly than the orthodox
presentation.

6. Taking suitable data construct a simple break even chart and show the break even point,
angle of incidence and margin of safety on the chart.
7. Distinguish between P/V ratio and break even point?

8. What are the various applications of break even chart? What are the criticisms leveled
against BEP analysis?
9. Fixed costs do not change with changes in volume and it is difficult for management to

control them”. Discuss.

10. “While variable costs are fixed per unit of output, the fixed costs are variable per unit of

output although all costs tend to be variable in the long run”. Explain.
Answers: Self Assessment

1. Break Even 2. BEP

3. cost-volume-profit analysis 4. Break Even chart

5. losses 6. profi t
7. equilibrium 8. short-run
9. uncertainty 10. P/V ratio
11. false 12. false

13. true 14. true
15. true

14.10 Further Readings

Books
Chandra, P. Financial Management - Theory and Practice, New Delhi, Tata McGraw-
Hill Publishing Company Ltd., 2002, p. 3.

Sudhindra Bhat, Management Accounting, New Delhi, Excel Books, 2009
Van Horne, J.C. and Wachowicz, Jr, J.M., Fundamentals of Financial Management,
New Delhi, Prentice Hall of India Pvt. Ltd., 1996. p. 2.

Online links
http://www.fei.org/
www.scribd.com

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