break-even point

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Break-even point

Refers to the price at which a transaction produces neither a gain nor a loss. In the context of options, the term has the additional definitions:
1. Long calls and short uncovered calls: strike price plus premium.
2. Long puts and short uncovered puts: strike price minus premium.
3. Short covered call: purchase price of underlying stock minus premium.
4. Short put covered by short stock: short sale price of underlying stock plus premium.

Break-Even Point

1. The sales or revenues necessary to cover costs and prevent a firm from operating at a loss. The breakeven may be relatively stable or it may fluctuate, depending on the company or industry. Companies with high breakevens tend to have large fluctuations in earnings from year to year.

2. The price of a security that, if one sells at it, will cause the investor to neither make a profit nor lose money on the sale.

3. In options, the price of the underlying asset that will ensure that the option holder will neither make a profit nor lose money on exercising the option. In calls, the break-even point is the strike price added to the premium, while in puts, it is the strike price minus the premium.

break-even point

In any project,the point at which revenue will be sufficient to pay all required expenses and debt service. Most industries have generally recognized rules of thumb for the appropriate break-even point. For apartments, it might be 80 percent occupancy, for self-storage it might be 55 percent occupancy,and for business center space it might be 75 percent occupancy.Most construction lenders require that a project at least reach the break-even point before construction lending can be converted to fixed-rate and lower-rate permanent financing.If preparing a pro forma for a project and your break-even point is dramatically different from the rule of thumb for your industry,it may be time to check your assumptions or your math.

References in periodicals archive ?
Important questions like this can be answered using the breakeven point (BEP), which is really a single year's cash flow model.
Breakeven economic analysis: Just as finance and real estate disciplines had their origins in economics, the breakeven point formula is closely associated with the breakeven point analysis of a perfectly competitive firm.
The breakeven point for a multiproduct firm, therefore, will ultimately depend on the sales mix of the products.
10 Breakeven point = Total fixed costs/weighted avg.
Column 4 displays the breakeven points in years for a taxpayer with no past IRA accumulations.
With similar returns, the breakeven points in years for the deferred annuity vis-a-vis a non-deductible IRA should be the same as the breakeven point for a non-deductible IRA vs.
Kagan also reports on last year's blockbuster programming deals, analyzing their economics and their impact on expected cash flow breakeven points.
Our goal is to continue to reduce costs, improve productivity and streamline our businesses in order to lower operating breakeven points throughout ATI.
We remain steadfast in our belief that those companies, like ADC, that continue to gain market share, lower breakeven points and strengthen balance sheets in this difficult environment will prosper sooner in a recovery.
In response to current conditions, ADC is targeting to further lower its breakeven point toward $250 million in quarterly sales from approximately $300 million.
efforts and breakeven points, can be used as frequently as a viewer wishes and results can be printed out.