Q.118
Given below are two statements, one is labelled as Assertion (A) and other one labelled as Reason (R).
Assertion (A) : A sound livestock business proposal should have early break even point
Reason (R) : Early beark even point indicates higher internal rate of return
In light of the above statements, choose the most appropriate answer from the options given below
EXPLANATION
Livestock Farm Economics, Project Formulation, Benefit-Cost Ratio, NPV and Break-Even Analysis
- Assertion (A) is Correct: In agricultural enterprise financial planning, achieving an early Break-Even Point (BEP) (where total revenue equals total fixed and variable costs) minimizes operating risk and ensures early solvency.
- Reason (R) is Correct: An early BEP means cash inflows recover capital outlays faster, reducing the discounted payback period and resulting in a higher Internal Rate of Return (IRR).
- Relationship: (R) is the precise financial principle that makes an early BEP desirable in enterprise evaluation.
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