BREAK-EVEN ANALYSIS: DEFINITION, IMPORTANCE, AND CALCULATION

Break-even analysis is a financial tool that helps businesses determine the point at which they will start making a profit.

It is important for businesses to know their break-even point so they can make informed decisions about pricing, production, and sales.

The break-even point is calculated by dividing fixed costs by the difference between the price of the product and the variable cost per unit.

The resulting number represents the number of units the business needs to sell in order to cover its costs and start making a profit.

Break-even analysis can also be used to determine the impact of changes in price, volume, or costs on a business's profitability.

Businesses can use break-even analysis to set sales targets, evaluate the feasibility of new products or services, and make decisions about whether to invest in new equipment or facilities.

Overall, break-even analysis is a valuable tool for businesses of all sizes and industries to help them make informed financial decisions.