Break-Even Point
The level of sales at which a business's total revenue exactly equals its total costs, resulting in neither a profit nor a loss.
Break-even is calculated by dividing fixed costs by the difference between price and variable cost per unit (the contribution margin), showing how many units or how much revenue is needed before a business starts generating actual profit.
Understanding the break-even point helps a business judge how a new loan payment, added as a new fixed cost, shifts that threshold, and how much of a sales cushion exists above or below it.
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