Break-Even Analysis
Definition
Calculating the sales level at which total revenue equals total costs, so the business neither profits nor loses. It shows how much must be sold to cover fixed and variable costs.
Formula
Break-even units = Fixed costs ÷ (Price per unit − Variable cost per unit)
Related Terms in Business Terms
Gross Receipts
The total amounts a business receives from all sources before subtracting any costs or deductions. Several tax and registration thresholds are measured against gross receipts.
Turnover
The total sales or revenue a business generates over a period. In accounting it can also refer to how quickly assets such as inventory or receivables are used and replaced.
Capital Employed
The total funds a business uses to generate profit, generally equity plus long-term debt, or total assets less current liabilities. It is the base for return on capital employed.
Fixed Asset Register
A detailed record of a business's fixed assets — cost, location, purchase date, depreciation and net book value. It supports depreciation accounting, insurance and physical verification.
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