Finance
This query is : Resolved
02 June 2012
What is the difference between the concept break even point and internal rate of return ?
02 June 2012
The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. It is also called the discounted cash flow rate of return (DCFROR) or the rate of return (ROR). In the context of savings and loans the IRR is also called the effective interest rate. The term internal refers to the fact that its calculation does not incorporate environmental factors (e.g., the interest rate or inflation).
The concept of a break-even point is common to both general business applications and in the trading process of securities and options. In both scenarios, the break-even point has to do with an equalizing of profits and expenses, with no real accounting for the apparent gain that takes place.
With business applications, the break-even point is focused on the generation of profit from the business endeavor. Essentially, the amount of revenue generated by the effort of producing, marketing, and selling a good or service is sufficient to cover all expenses. All expenses that are both directly and indirectly related to the business of the company will be included. This will involve the cost for raw materials, labor, equipment, facilities, storage, packaging, and transportation, along with any peripheral expenses. In the final analysis, the break-even point is the number of units that must be sold in order to completely recover the total cost of producing and marketing the goods. Ideally, the break-event point will be reached and then exceeded, resulting in a net profit for the business venture.
The concept of a break-even point is common to both general business applications and in the trading process of securities and options. In both scenarios, the break-even point has to do with an equalizing of profits and expenses, with no real accounting for the apparent gain that takes place.
With business applications, the break-even point is focused on the generation of profit from the business endeavor. Essentially, the amount of revenue generated by the effort of producing, marketing, and selling a good or service is sufficient to cover all expenses. All expenses that are both directly and indirectly related to the business of the company will be included. This will involve the cost for raw materials, labor, equipment, facilities, storage, packaging, and transportation, along with any peripheral expenses. In the final analysis, the break-even point is the number of units that must be sold in order to completely recover the total cost of producing and marketing the goods. Ideally, the break-event point will be reached and then exceeded, resulting in a net profit for the business venture.
02 June 2012
Sir
I am not asking about variations in their meaning.
At BEP : Total Revenue = Total Cost
At IRR : Total Inflow = Total outflow
What could be the difference then ?
I am not asking about variations in their meaning.
At BEP : Total Revenue = Total Cost
At IRR : Total Inflow = Total outflow
What could be the difference then ?
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