What is Breakeven Point definition/concept

This concept can normally be applied in the business and employee field to indicate that a business neither advances nor retreats. As its name indicates, this is a point at which the sales obtained allow you to assume all costs, whether fixed or variable. Breakeven Point

An essential piece of information to know the economic situation of a company

The break-even point in a company is based on the correct ratio of sales to total costs. If both concepts are the same there is a balance because the utility is zero. In other words, there are no gains or losses. Naturally, this type of analysis is part of the income statement in which a series of issues such as variable costs, fixed costs and the contribution margin are accounted for.

The break-even point is an undesirable business situation, since there is no loss or profit in it . Thus, it can be said that this point is the minimum situation that a company should have, as there are more losses than gains.

The break-even point lets you know what level of sales is needed to meet the expenses associated with the business . For this reason, it is understood that this indicator is a basic tool to know the solvency of a business and its level of profitability . Breakeven Point

In the business field, the equilibrium point  receives other possible names, such as neutral point or profitability threshold. If a vehicle is in neutral, neither forward nor backward, this situation is extrapolated to the business world.

An important tool for making decisions

Knowing the balance point in relation to an economic activity  is a tool with high strategic value. In this sense, based on objective data that indicates the dead end of an activity, it is already possible to design a business strategy to seek profitability.

The concept of balance in relation to people

In everyday life we ​​use the term balance in many ways. Thus, we say that a football team is balanced when its attack and defense have an adequate proportion. Breakeven Point

In the personal field, the situation is balanced when a person does not present a marked incompatibility (for example, a person with a lot of money but with poor health has a clear imbalance in his life). Somehow, all human situations , both individual and collective, can be expressed from the idea of ​​balance or imbalance.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button