Fixed Costs
Business expenses that stay roughly the same regardless of sales volume, such as rent, insurance, and loan payments.
Because fixed costs don’t fluctuate with revenue, they represent a baseline a business must cover every period regardless of how sales are trending, which is why they’re central to calculating a break-even point.
Adding a new fixed monthly loan payment increases a business’s total fixed costs, raising the sales level needed to break even, which is part of why understanding this baseline matters when evaluating new financing.
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