Companies use financial measures to evaluate the merit of a new-product proposal. The simplest to use is called ________, in which management estimates how many units of the product the company would have to sell to break even with the given price and cost structure.
A) risk analysis
B) break-even analysis
C) ANOVA analysis
D) conjoint analysis
E) regression analysis

Question

Quizplus · Accepted Answer

The financial measure described in the question is break-even analysis, where the company evaluates how many units it needs to sell to cover both its fixed and variable costs. This is a straightforward way to determine if the proposal is financially viable. A is incorrect because risk analysis focuses on identifying and assessing potential risks associated with a project. C, D, and E are also incorrect because these analyses are not used to evaluate the financial viability of a product proposal.

Companies Use Financial Measures to Evaluate the Merit of a New-Product