Break-even analysis

Definition / Meaning Break-even analysis

With the help of the break-even analysis, relationships between sales, costs, profit and employment can be established or examined. It is also called break-even analysis.

Benefit threshold / critical quantity or break-even point

The breakeven point is the point at which a company's total costs and revenues are the same. It is also known as the utility threshold, critical amount, and break-even point. Exceeding it leads to the profit zone up to the capacity limit, its undershoot leads to the loss zone.

The breakeven point analysis can relate to:

• One-product companies where the breakeven point is relatively easy to determine
• Multi-product companies that are more difficult to identify. The breakeven point is reached when the total revenues of the individual product types cover the total costs that arise for these product types. A large number of combinations are possible with regard to the sales quantities of the individual products.