break-even point


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Related to break-even point: fixed costs, Break-even analysis

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 ?
This means, if you have a half dozen cases like this in a year, you can expect two of them to fall short of the break-even point, and four of them to exceed the break-even point, with the average settling somewhere near the break-even point.
Since their adjustments exceed the AMT break-even point, they would be subject to the AMT.
Using the same data given in Example 1, where unit CM = $250 - $50 = $200 and CM ratio = 80%, we get: break-even point in units = $650,000/$200 = 3,250 patient days and break-even point in dollars = $650,000/0.
Figure 2 also indicates a foundry's production costs, overhead costs, required return, net profits less required return, and taxes when the production time is below the cost break-even point.
3) However, this break-even point can be significantly lower in states that recognize S corporations if at least part of taxable income qualifies as long-term capital gain.
In addition, the break-even point of a bull call is 95 points less than the break-even point of a long call.
An official for DaimlerChrysler Aerospace (Dasa), one of the Airbus Industrie consortium members, has apparently told a German radio station that the consortium was very confident of breaking even with the 555-seat aircraft and that 'the break-even point for this aircraft is significantly below the number analysts have said.
If a manager i s unsuccessful in this area, it probably stems from the fact that he doesn't speak the language of management verywell; he fails to convincingly state his arguments of how many dollars of new sales are necessary to justify the cost of adding another salesperson; where the break-even point is in putting another man on; and how many additional profit dollars can be generated.
Light volume and a recovery in oil prices kept market gains under control on Tuesday, though the major averages did close above the break-even point.
It was the fourth month in a row the index had failed to reach the psychologically important break-even point.
The airline's average seat booking rate was below its break-even point of 50% for both routes during the period between May 1999 and March 2000.