Small Business Terms: Break-Even Point

By QuickBooks Canada Team

0 min read

The break-even point is the figure a company must attain to make a net income of $0. The calculation can be reported in dollars or units of sale. To calculate the dollar amount, divide total fixed costs by the contribution margin ratio. To calculate the units of sale, divide total fixed costs by the contribution margin per unit.

Both calculations analyze the relationship between fixed and variable costs. Lower variable costs mean more revenue is retained per additional unit of sale. However, part of these earnings must cover fixed costs. Therefore, the break-even point is an important calculation as it indicates a forecasting point in revenue where all fixed costs are covered and all revenue after variable coats is retained.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

What Is a Term Sheet?

From investors to freelance graphic designers, it takes all kinds of people…

Read more

Develop a Marketing Plan for Your Nonprofit Organisation

Developing a regular list of dependable donors and patrons to your nonprofit…

Read more