2. What is it ?
A break-even analysis is a useful tool for determining at what
point your company, or a new product or service, will be profitable. Put
another way, it’s a financial calculation used to determine the number of
products or services you need to sell to at least cover your costs. When
you’ve broken even, you are neither losing money nor making money,
but all your costs have been covered.
3. There are a few definitions you need to know in order
to understand break-even analysis.
•Fixed Costs: Expenses that stay the same no matter how
much you sell.
•Variable Costs: Expenses that fluctuate up and down
with sales.
4. What is it used for?
• Break-even analysis tells you at what level an investment must
reach to recover your initial outlay.
• It is considered a margin of safety measure.
• Break-even analysis is used broadly, from stock and options trading
to corporate budgeting for various projects.
5. Benefits doing a break-even analysis.
There are many benefits to doing a break-even analysis.
• Price smarter
• Cover fixed costs
• Catch missing expenses
• Set revenue targets
• Make smarter decisions
• Limit financial strain
• Fund your business
