Updated on: Mar 18, - PM. A break-even analysis is a financial tool which helps a company to determine the stage at which the company, or a new service or a product, will be profitable. In other words, it is a financial calculation for determining the number of products or services a company should sell or provide to cover its costs particularly fixed costs. Break-even is a situation where an organisation is neither making money nor losing money, but all the costs have been covered. Break-even analysis is useful in studying the relation between the variable cost, fixed cost and revenue.
Financial Section of Business Plan | How to Write and What to Include
Our free break even analysis templates help you to determine your break even point. A break-even analysis or break-even point is a calculation that determines how much of a good or service needs to be sold in order to cover the total fixed costs. It examines the margin of safety for a business based on the revenues earned from the normal business activities. The break-even analysis determines the level of sales that the business must have, but it is a document intended only for internal usage. Therefore, it is not recommended to be provided to investors, regulators, and other financial institutions.
What is a break-even analysis? A break-even analysis is a critical part of the financial projections in the business plan for a new business. Financing sources will want to see when you expect to break even so they know when your business will become profitable.
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