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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
The effectiveness of a reconstruction can be evaluated using the break-even point analysis method once reconstruction and production costs are added together.
Break-even point analysis method in building thermo-isolation decisions
Break-even point analysis method can be also successfully applied in building thermo-isolation decisions.
Since their adjustments exceed the AMT break-even point, they would be subject to the AMT.
Their current break-even point is $22,590 in either preferences or adjustments.
Exhibit 3 indicates that the AMT preference and adjustment break-even point does not rise very much from taxable income levels of $50,000 to about $150,000.
The break-even points can be found at the intersections of the four lines and the zero profit line.
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. If the production time is greater than the cost break-even production time, the product costs exceed the revenues and a loss is incurred .
Break-even point in dollars = $650,000/0.8 or $812,500.
Besides determining the break-even point, CVR analysis determines the volume necessary to attain a particular level of surplus.