Description: The break-even point is the level of activity at which total revenues generated by a company equal its total costs, meaning there are no profits or losses. This concept is fundamental in financial management as it allows managers and entrepreneurs to understand how many units of a product must be sold to cover costs. Break-even analysis is based on the relationship between fixed costs, variable costs, and selling prices. Fixed costs are those that do not change with the level of production, such as rent or salaries, while variable costs fluctuate with production, such as materials. Identifying the break-even point helps companies make strategic decisions, such as pricing, cost control, and production planning. Additionally, it provides a clear view of the financial viability of a project or business, allowing entrepreneurs to assess risk and profitability. In summary, the break-even point is an essential tool in business management that helps companies achieve financial sustainability and maximize their performance.
