Introduction to break-even

A businesss break-evenpoint is the point where its total costs equal the total of its sales income.

A business must ensure that the money it brings in from sales (called revenue) is at least equal to the level of its costs. If costs are greater than revenue the business will not survive as it is making a loss; if revenue is greater than costs it will make a profit, however, if costs and revenue are equal it will simply break even, with neither a profit nor a loss being made.

By calculating the break-even point, the business can predict the minimum number of goods it must sell in order to cover its costs and begin making a profit.

It is possible to calculate the break-even point using two methods graph and formula. You will find a businesss break-even point on the next page.