Case Study - Break-Even Analysis Having received both the cash flow forecast (Feb Issue) and the financial analysis (March Issue) Philip Rose has become much more aware and now has a more clear understanding of his financial statements. You may recall in the earlier case he was considering investing 27000 in a new childrens play area. He has decided to partially fund this by long term finance from the bank. In addition to the cash flow forecast and profit projections previously prepared, his small business advisor (bank employee) has mentioned the concept of break- even. The case now considers the factors that underpin this concept and its application to his accounts. He has recently received his draft profit and loss account for year ended 31 December 2005 and this shows Philip Rose Trading as White Swann Inn Trading and Profit and Loss Account for the Year Ended 31 December 2005 Sales 325100 Stock at 1 January 2005 15400 Add purchases 157150 172550 Less stock 31 December 2005 16100 Cost of sales Gross profit 156450 168650 Expenditure Wages 32100 Heat, light and power 8750 Cleaning and maintenance 6500 Consumables 1530 Insurances 1350 Rent 28500 Business rates 7650 Bank charges 800 Motor vehicle running costs 1420 Depreciation Fixtures and fittings Kitchen equipment Motor vehicles Net profit for year 5000 1500 3125 98225 70425 Includes maior re-decoration of bar area