Complementary break-even point with economic value added

César Omar López à vila and Norma Pontet Ubal
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César Omar López à vila: Universidad Autónoma de Occidente
Norma Pontet Ubal: Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales. Departmento de Finanzas

No 128, Documentos de Investigación from Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales

Abstract: This study was aimed at proposing a complementarity accounting–financial model from the potentialities of the Break-Even Point formulation of the variable or marginal direct cost system with the economic value added model. A financial planning tool is coordinated, which, in so doing, is proposed as an instrument to validate the financial information that will allow the observation of maintenance of the financial total equity from the conceptual framework of International Financial Reporting Standards. Through a qualitative, exploratory and descriptive investigation using the inductive method, this study conducts a critical review of the model formulations for contrast and subsequent conformation of the model that complements the break-even point with the Economic Value Added based on the Net Operating Profit After Taxes, Capital asset pricing model, Weighted Average Cost of Capital and Return On Invested Capital. The result corroborates the starting hypothesis so that it can be concluded that the proposed complementarity structure is met and that complementing the Break-Even point with the economic value added in short- and medium-term budgets contributes to sustainable competitive strategic planning, demonstrating that the true break-even point is reached at the inflection point where the business is capable of producing a return that is higher than the weighted average cost of capital

Keywords: EVA; WACC; Break-Even point; ROIC; Variable Direct Cost, IFRS (search for similar items in EconPapers)
JEL-codes: G12 G17 G31 G32 M20 M21 M40 M41 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2020-08
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