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Break-even
Business
WHAT IS IT?
Break-even is the level of sales at which a business covers its relevant costs without making a profit or loss.
IN PLAIN ENGLISH
It is the point where the money coming from sales covers the costs included in the calculation.
SIMPLE EXAMPLE
If monthly fixed costs are £6,000 and each £15 sale contributes £10 after its direct cost, break-even is 600 sales.
WHY DOES IT MATTER
Knowing your break-even number helps you understand how much you need to sell before generating a contribution above those costs.
THE ROCKET TEST
Break-even is the sales level where the calculated costs are covered.
SEE IT IN ACTION
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