What is a Break-Even Analysis?
A break-even analysis is a valuable calculation that is helpful with both large and small business accounting. Essentially, the break-even analysis is a process that allows an entity to determine the amount of generated revenue must be produced in order to cover all the costs of operating the business. Conducting a periodic break-even analysis helps a company to position itself so that the business is competitive, is able to reach a point where the company becomes profitable, and also help the business prepare for expansion. The elements that go into a break-even analysis are very straightforward. The first step is to identify and account for all expenses associated with the business venture. This will include both fixed costs and variable costs. For purposes of arriving at the break-even analysis, taxes certainly are taken into consideration. Factors such as the cost of raw materials, labor, management of labor, plant operations and machinery, sales, marketing, and packaging all go in
A break even analysis shows the fees and expenses investors can incur on an initial investment in a pool or program, and the dollar amount that the pool or program must earn for the investor to break even after on year. A break even analysis must be given to investors when a front load fee is being charged.
