Techniques employed in Company Recovery



Executive Summary

The assignment is divided into three parts, which are Break even analysis, calculation of payback period and accounting rate of return of the given data, and the balanced scorecard. The breakeven analysis is a useful technique that helps in determining the number of goods that a company should produce in order to reach to a point where sales is equal to total cost. The concepts covered under this heading include analysis, margin of safety, derivation of formula and contribution margin. The pay back period and accounting rate of return are capital budgeting techniques that show the time period an investment shall take to recover and the expected return on the investment. These approaches do not consider time value of money, thus, net present value is found to be an appropriate method of assessment of investments. A balanced scorecard approach is used by management as a strategic tool that is comprised of automated designs and methods to track and evaluate the performance of employees including monitoring their activities related to execution of a transaction and assessing the result of the respective course of action. The four perspectives of this approach are also covered, finance, customer, growth and learning and operating procedures.

Introduction3

Breakeven analysis3

Payback period8

Accounting rate of return8

Net present value9

Balanced scorecard approach9

Conclusion13

References15

Techniques employed in Company Recovery

Introduction

The primary purpose of this report is to enhance and apply the knowledge gained from the unit. The core concepts that are tested and practiced via scenario based approach in this report are break even analysis, advantages and disadvantages of break even approach, critical analysis of this technique with respect to the given case, calculation of given data by using payback period, accounting rate of return, net present value, balanced scorecard technique and related concepts.

Breakeven Analysis

The breakeven analysis is conducted in the field of cost accounting, The break even point represents the number of units of goods produced by a company at which cost of production becomes equal to revenues received by selling these items. This is the point where company has no loss and no gain. However, at this point all capital related adjustments have already taken place such as opportunity cost, generation of expected rate of return. The firm is said to have paid all the cost of capital or opportunity cost at a breakeven point and profit is still zero. This approach helps in determining the capacity of a firm to sell the specified number of units. It facilitates firms in deciding whether it should reduce the fixed cost or variable cost to reach to a point where it can sell goods with no loss. Reduction in either of the cost helps in reducing the breakeven point and facilitates firms to sell lower number of goods and services (Cafferky and wentworth, 2010, pp. 29-40).

The primary goal of a breakeven point is to evaluate the impact of earnings on marketing activities. However this method is considered as the simple but very analytical tool to have a rough estimate ...