When taking on a new business, it's extremely important to be profitable. All new businesses begin in debt and after months or years of work they may finally break-even. This is the day that a business
owner is finally out of debt and is a call for a celebration. However, many businesses never reach this
point and close. According to research from the University of Tennessee, 50% of all small
businesses fail within the first four years. The most common reason for failure? Poor financial
planning and incompetence.
Below are small businesses that are opening soon. They have planned for the necessary startup
costs, budgeted for monthly expenditures and have projected monthly revenue. You are an
accountant and have created linear models to project the revenue and expenses of each business,
In each model x represents months. When will the business below finally get out of debt? Would you
suggest starting the business given your calculations? Why or why not?
All-Star Daycare Burrito Barn Cell Resell Dinner Food Spot
Start-Up
$125.000
$45,000
$16.000
$55,000
Cast
$52.000
$25,000
$6,500
$32.000
Proiected
Monthly
Expenses
Projected
Monthly
Revenue
$58.500
$27,500
$6,250
$36.000
Lab
Expense
Madel
Revenue
Model
LaToya
Break-Even Point
ya
Sophia
LaToys
Pago
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