ENHANCEMENT OF THE CVP ANALYSIS
DOI:
https://doi.org/10.25806/uu2202449-54Keywords:
CVP analysis, break-even point, coverage amount, profit, operating leverage, financial safety margin, management decisionsAbstract
From the perspective of the enterprise performance management, CVP analysis is a powerful tool for financial planning and decision-making, which is determined by its features. The purpose of the study is to identify the main components of the CVP analysis, which will expand its functionality for managing an enterprise. The main components of the CVP analysis have been described. They include coverage amount, a coverage rate, the break-even point, profit, financial security, the financial safety margin, an operating leverage, and financial strength. To expand the functionality of the CVP analysis, a financial model for forecasting its parameters has been proposed. The basic block of the financial model consists of an information base for calculating parameters. The creation of the main block of the financial model is determined by management requests according to the functionality of the CVP analysis. The financial forecasting model of the component parameters of the CVP analysis is able to successfully function independently, or be integrated into the budgeting concept, which, in turn, will increase its practical value in financial planning. Enhancement of the CVP analysis allows us to generate financial information on its key parameters, that contributes to making informed management decisions in the field of supply, production and sales. Further research in the field of enhancement of the CVP analysis involves the development of nonlinear, dynamic and stochastic models that reflect the dynamic conditions of modern business.
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