Quick Definition

Break-even analysis is a financial calculation used to determine the point at which revenue received equals the costs associated with receiving the revenue, indicating no net loss or gain.

Formula

Examples

• 1A startup company calculates its break-even point to determine how many units of its product it needs to sell to cover its initial investment and operating costs.
• 2A restaurant owner uses break-even analysis to figure out how many meals need to be sold each month to cover rent, salaries, and ingredient costs.
• 3An online retailer performs a break-even analysis to decide the minimum sales volume required to justify the launch of a new product line.
• 4A service provider uses break-even analysis to set service fees that will cover all operational expenses and start generating profit after a certain number of clients.

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