Page 45 - IMDR MSME BOOK 2021

Managing Finance in Micro, Small & Medium Enterprises
Cost management helps a rm to forecast the future
expenditures in line with their budgeting goals. It helps
in identifying, collecting, classifying, and collating
information that can be used by rms in planning,
controlling, and taking decisions to keep costs in the
desirable limits.
The Break-even analysis is also called Cost Volume Prot
analysis. It is an analytical tool for studying the
relationship among volume, cost, price, and prots. It is
an integral part of the prot planning process, which
helps the rm to target desired sales volume, prot or
control cost and align the concerned decisions
accordingly. A break-even analysis is a nancial tool
which helps to determine the number of products or
services a company should sell to cover its costs
(particularly xed costs). The break-even point is when
the total costs equal total revenue. The total cost
comprises both the xed and the variable cost. For any
business, it is important to determine their break-even
point to help them in the decision-making process.
In the present study it is found that 87% of the
respondent rms have clear ideas of xed costs of
running their business. It means out of 199 rms; 174
rms have complete understanding of the quantum and
signicance of the xed cost and its role in cost
management. When asked about break-even sales of
their product, 80% of the rms have clear idea about the
break-even analysis and they are aware of breakeven
point of their specic products.
To understand the perception of the respondent
business units towards the effectiveness of breakeven
analysis for the organisation the constructs have been
designed and opinion obtained with the help of Five-
point Likert scale with the corresponding scores ranging
from Strongly Agree (5) to Strongly Disagree (1).