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LECTURE NOTES

XI ENTREPRENEURSHIP

CODE-241506010114

TOPIC-BUSINESS FINANCE AND ARITHMETIC

SUB TOPIC- BREAK-EVEN ANALYSIS AND TAXES

1. A business’s break-even point is the amount of revenue that it must generate in order to
equal its expenses. In other words at the break-even level, total revenue is equal to the

total expenses.
2. The formula for computing break-even volume:
Break-even volume = Fixed cost/ Gross margin per unit
3. Importance of Break-Even Analysis: An entrepreneur can use the information generated
from break-even analysis in making a wide range of business decisions, such as :
(i) Setting prices
(ii) Preparing competitive bids
(iii) Applying for loans
(iv) Profit planning
(v) Goal setting

4. Tax is basically a financial charge imposed upon a taxpayer by a state such that failure to pay
is punishable by law. It can also be defined as a fee charged or ‘levied’ by a government on a
product, income or activity.

5. Difference between direct tax and indirect tax is:

Basis Direct tax Indirect tax
Meaning A direct tax is one on which An indirect tax is one, the
the burden cannot be shifted burden of which can be
by the taxpayer to someone shifted by the taxpayer to
else. someone else.
E.g. Income tax, property tax E.g. Service tax, GST

6. The government levy and collect taxes, so as to spend it for social welfare in the form of
public expenditure like :

(i) Laying roads

(ii) Providing social service