Published in Marketing and Strategy Terms category by MBA Skool Team
What is Break Even Point?
Break even point (BEP) is the point where the profit from the transaction is zero and the total sales is equal to total costs. Break even point is he inflection point where the revenue sales are same as the costs. At the break even point, there is zero profit or zero loss for the company.
Break even point is important for companies to understand the minimum business required to sustain any product or service. The units break even i.e. number of units to be sold at the break even pricing helps in evaluating the break even point. This method of evaluation is known as break even analysis.
Break even point is an important aspect for any business. It gives that inflection point for any business for understanding the profitability for a company. The break even point is calculated as the ratio between costs and revenues. The various scenarios for calculating the break even point are:
1. If break even point is less than 1: This means that the costs are lower than the revenues & hence the company is profitable
2. If break even point is 1 : This means that the costs & revenues are equal, i.e. there is not profit or loss
3. If break even point is greater than 1: This means that the costs are higher than the revenues, i.e. the company is loss making
Hence, this concludes the definition of Break Even Point along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
Browse the definition and meaning of more similar terms. The Management Dictionary covers over 1800 business concepts from 5 categories.