What is Break-even Analysis?
Break-even Analysis is an economic concept that is used to determine the number of units that needs to be sold by the company to cover the costs and gain no profits. It is the level of units that a company should at least reach in order to survive in the market. Break-even is a level where a company neither earns any profits nor suffers any losses. Basically, the break-even point tells us the units to be sold in order to cover costs.
Key Takeaways from Break-even Analysis:
- Break-even Analysis is a concept used to determine the point where there are no profits and no losses.
- Break-even is a point where the company covers all of its costs.
- Lower fixed costs lead to a lower break-even point and higher fixed costs lead to higher break-even point.
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