break-even analysis
Break-even analysis is a financial tool used to determine the point at which total revenues equal total costs, meaning there is no profit or loss. This point, known as the break-even point, helps businesses understand how much they need to sell to cover their expenses. It considers both fixed costs, which do not change with production levels, and variable costs, which fluctuate with the amount produced.
By calculating the break-even point, companies can make informed decisions about pricing, budgeting, and sales strategies. This analysis is essential for assessing the viability of a business idea and planning for future growth.