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Break-Even Analysis and Operating Leverage (Análisis De Punto De Equilibrio Y Apalancamiento Operativo - in Spanish)

By Ignacio Vélez and Ricardo Dávila

Abstract

This is a teaching material for a module of Financial analysis at Universidad Tecnológica de Bolivar. The educational material was developed with Professor Ricardo Davila from Universidad Javeriana, Bogota, Colombia. The written material has been modified several times using the feedback from students and other users. This material is an unpublished one. This chapter is a detailed presentation of the traditional break-even point model and the operational leverage for a firm. However, we make some changes to the traditional way of looking at the break-even analysis, including how to analyze the discontinuing of products in case they are not profitable. We give detailed examples for each case.

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