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 ?
The effectiveness of a reconstruction can be evaluated using the break-even point analysis method once reconstruction and production costs are added together.
This changes the above break-even point dramatically, and by much more than 50 percent.
The lowest break-even point occurs when the 28% marginal tax rate begins.
Besides determining the break-even point, CVR analysis determines the volume necessary to attain a particular level of surplus.
The break-even point is $150,000/($7,000 - $4,000) = 50 participants.
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.
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.
The cost break-even point is obtained by the intersection of the zero profit line and Line B.
Based on these values, the model computes 1) the remaining term (in months) of the existing loan, 2) the new loan amount (assumed to be the existing loan balance plus all refinancing costs), 3) the new principal and interest payment, and 4) the break-even point, in months, of the existing and new loan payments.
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.