Sunday 23 March 2014

Break Even Analysis



Break even analysis
Edwin owns a bakery and was able to sell 120 pieces of bread at 10 Rs each in the month of October. He pays his assistant Rs 500, for supplies Rs 100 and remaining money on rent for Rs 600. Here the variable cost is paying for his assistance and supplies. Fixed cost is rent.  He has zero profits here and was able to only meet fixed and variable costs and expenses. He had obtained the break even sales but not gained any profit.
The wages given to assistant and supplies are variable expenses. This expense can vary by giving less wages. But the rent given for the shop cannot vary as it is fixed cost.
Next month if he wants to gain 10 % profit then he has to think of giving less wages to his assistance and supplies. He should also think of increasing the cost of bread. By doing this he can gain profit for his business. Basically break even analysis is a way of calculating how much of bread has to be sold to cover all the fixed and variable cost. How much money does Edwin need to run his business well and gain profit? The breakeven point is met only when income equals all business cost.
Break even analysis is a tool used to identify when a business will be able to cover all its expenses and begin to make its profit. In this case Edwin has to think of making profit by increasing the cost of bread and paying less wages. This can be done by doing a small research on his own business and plan well for gaining profit. Breakeven point determine if the business will be profitable and is included in the business plan. An established business will use this tool as it considers whether to change the price of a product, expand, or take on new debt.
Contribution margin identifies how much of each sales dollar is available to cover other costs and provide a profit.
Break even analysis = fixed cost/ contribution margin per unit.

Sweet Spot



The Sweet Spot-
Coyle goes for a journey in search of talent in young people. He explores lot of things in his journey. He finds that a talented person is always engaged in one activity that is special or surprising. Deep practice is the best way to achieve success. Experience helps to slow down, find out errors and then correct them. A person has to know the gap between what he knows and what he is trying to do. By this gap talent can be captured. He says that every small effort gives big lasting results. He also includes that every person has to position himself at a place of leverage, capture the failure and turn it into skill.
Coyle’s main argument is that talent can be achieved only by deep practice and efforts. He claims that “Deep practice has two strange concepts- One concept cuts against intuition about talent. Intuition tells that practice relates to talent. The second concept is that deep practice takes events that normally mistakes done will turn them out into skills”.
Coyle draws on various evidences. He takes many examples starting with the deer in the ice mountain which wants to climb the hill and reach the top. He says that all the deers struggles, slips, falls and stops. It tries again and again to get up and reach the top. It practices every step not to slip and fall down. This practice helps the deer to move up.  Coyle takes the example of Brazilian soccer team as an evidence to prove that practice helps the player to become the world’s best team. Each and every player had a kind of concentrated talent. Brazil produces great player because they have trained in a particular way , with a particular tool that improves ball-handling skill faster than anywhere else in the world. They have found a way to increase their learning. This can be called as deep practice.
Coyle has many sub-claims (smaller arguments). He takes the examples of small things like memory test. He gives one small test to remember few words that are written in coloumn A and B.  Coloumn A has few words and coloumn B has blank letters to be filled up. After reading that and filling letters we tend to remember the words from Coloumn B. while doing this exercise I stumbled, stopped and figured out the words that needs to be filled. .  That is because the memory is more when we start practicing things.  Coyle says that there is a micro second struggle and this has made a huge difference. He says that in this exercise a person will not practice harder but practice deeper.  The memory improves, but simply because of deep practice.
Coyle’s aim was to visit greatest talent hotbeds in sports, arts, business and music. He wanted to find out how they consistently produce extraordinary performers. He takes various scenarios and explains that to achieve anything there will be little bit of struggle and failures. He says that learning is the process to achieve success. He uses certain key terms to explain the concepts like “sweet spot, edges of ability, deep practice, corps pilot, penguin-hopping, tinker’s mind, the Blue Danube. Coyle says that the trick is to choose a goal, just go beyond the present abilities and target struggle with deep practice.
Coyle explains the concept by giving real life examples. He shows the real things happening around the world in talent code. He explains every example which says that there is a struggle, failure and practice for reaching the goal. The example of Brazilian soccer, Edward link’s unsual device is the real story of collective talent players to achieve success.
There are many key terms used are Great expeditions- explains his wife and children in logical terms. He uses statistical impossibilities – a mouse that had not only roared but that had somehow come to rule the forest. He uses elastic- trying to learn, ball handling maneuver. Time – into a waterfall of notes. Polymath-cheerful. He describes that memory as a tape recorder but says that is wrong. He uses whetstone as a knife - it is a vital but useless without solid blade of so-called natural ability. He uses bed rock- when pilots training were built on bedrock belief that good pilots are born not made. He uses penguin hopping- taxiing.  In stubby- winged crafts or they flew and hoped.
Coyle’s context or occasions for his argument is that he uses the example of Brazilian soccers with a collective talent in the football match. He says that there were different skills used to handle the ball from all the players. They have practiced it several times to get the perfection in their game. He gives the situation of the demonstration shown in the airplane for the life vest and life jackets. He uses all these context to understand that practice is required to do anything in perfection. It is also said that if we have to be good reader then we have to open the book and read. Without reading books a person cannot be a good reader.
Potential uses of all his arguments are that a person has to fix up a goal and put all his efforts to achieve it. Doesn’t matter if he fails and takes that as learning with the deep practice.

Double Entry Accounts



Double Entry Accounts:
“Did you go through the explanations of Basics of accounting? “ Asks Rahul to his brother.  “ Yes , I spent some time in recollecting the process of accounting”  said his brother.  “Now I want to know about putting all these transactions in correct accounts. How do I identify the accounts and how do I put those all these in ledger? “.
Rahul says, “  Fine I will first tell you about the classification of accounts and how to identify the accounts from a transaction and then place it in the right place. After  that I will give you a small puzzle or a game to work on . You should give me the to it answers.
Let me start with the first thing. What do you know about asset and liabilities?
In accounts the first thing that you should know is about the Assets and liabilities. So how do you identify what are assets and liabilities?
Rahul gives a simple explanation on this - “ What happens with most of the people is .. you think of going out, work hard, get good job and save some money. You also might have thought about  having the boy or girl of your dream and you might move and live in together. You decide to live together and think of buying  a house , buying vehicle and then having some cash in the bank for your basic requirements.  All these are assets. A valuable item that is owned by you is called as an asset(what you own).
After some period of time then you think about how long you will be working and where the money has actually gone? Loan amount payable, payment to be made for the goods supplied on credit, overdraft raised by a business man in bank, salaries payable,  etc are the examples of liabilities. It is an obligation to pay money to another party called as liabilities(what you owe).
Now I will give you a small test to identify the assets and liabilities. Identify whether  this is an asset or liability?                       

 Building is an asset
               Credit card is a liability
Cash is an Asset
Loan is a liability

Jewellery is a asset

 Overdraft is a liability

Debt is a liability

  




Good now you are able to identify the assets and liabilities.
Now let me tell you about debit and credit. What do you know about debit and credit.

To know  more about debit and credit you should know about the three golden principles of accounts. That is

Personal Accounts-Accounts of persons/artificial personal accounts/representative personal accounts- Debit the receiver; credit the giver

Real Accounts-May be tangible or intangible- Tangible means which can be touched and felt. Intangible  means – which cannot be seen but felt-
Debit what comes in; credit what goes out

Nominal Accounts- Related to salary/rent/ interest earned/ profit or loss
Debit all expenses and loses; credit all incomes and gains