breakeven analysis

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Breakeven Analysis

An analysis of a product or company's sales required to neither lose money nor make a profit, but simply to cover costs. A company needs to at least break even in order to make the expense of producing a product worth the effort. As a result, breakeven analysis is an important feature in evaluating the risk of an activity. Breakeven analysis calculates the relationship between the fixed costs, variable costs, and profit of the product.

breakeven analysis

A mathematical method for analyzing the relationships among a firm's fixed costs, profits, and variable costs. Financial analysts are particularly interested in how changes in output and sales will translate into changes in earnings.
References in periodicals archive ?
The formula for break even analysis on sales is shown below:
From the credit manager's perspective, break even analysis is valuable in a variety of ways, including:
Break even analysis tests the validity of assumptions made by your customer about the likely success of their business.
Certain assumptions that were made in constructing the break even analysis shown above were made to simplify the calculation.