The document discusses several financial planning techniques used by investors, including break even analysis, payback period, and net present value. It provides examples of calculating break even points based on fixed costs, variable costs, selling price, and desired profit. Payback period is defined as the amount of time it takes to recover the initial financial investment based on estimated receipts. The document prompts the reader to consider practice questions related to these techniques.

1. Financial Planning 3

2. Investment Strategy
 When we invest we risk funds for positive
returns.
 Without some form of investment it is
unlikely a business will grow
 Look at the article on page 358 relating to
debt investors

3. Indicators
 Investors use a number of important
techniques to help with finance
 Break even pricing
 Payback period
 Net present value

4. Break Even
 Break even = Fixed Costs + Desired Profit /
(selling price per unit – variable costs per unit)
 FC = $3
 VC = $4
 SP = $15
 DP = $800
 Thus 3 +800 = 803 / (15 – 4) = 803/11
 73 units needs to be sold to break even

5. Break Even
 FC = $6
 VC = $4
 SP = $24
 DP = $914
 Work out the break even point now

6. Payback period
 This calculates the amount of time it takes to
recover the initial financial investment.
 Here you take the estimated receipts of sales
and add them up until you recover the
investment.
 Have a look on page 360. Project A $100000 –
how long does it takes to repay based on
ESTIMATED RECEIPTS ONLY
 The problem with this method is it relies only on
estimates

7. Questions
 Page 360 Q 1, 3 and 4

8. Stop and Think Task
 To finish the lesson off today lets look at
the stop and think at the top of page 361.