Break-even point

The level of sales at which profit is exactly zero

In detail

Divide fixed costs by the share of each sale left after variable costs. Above that level the company makes money. A business with heavy fixed costs breaks even late, so a small drop in sales can tip it into a loss.

Example

Fixed costs of $4 million at a 40% margin break even at $10 million of sales.

Related terms

Fixed and variable costs Operating profit Revenue

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