Cost-Volume-Profit Analysis (CVP) is a financial tool that helps businesses understand how changes in costs and sales volume affect their profits. By analyzing fixed costs, variable costs, and sales prices, companies can determine the break-even point—the level of sales needed to cover all expenses. This analysis is crucial for making informed decisions about pricing, budgeting, and financial planning. CVP analysis also allows businesses to evaluate the impact of different scenarios, such as increasing production or changing prices. By using this method, companies can strategize effectively to maximize profits while minimizing risks, ensuring long-term financial health and sustainability.