Break Even Flashcards
What is the break even point?
The point at which cost or expenses and revenue are equal: there is no net loss or gain.
What is the margin of safety?
In Break even analysis, margin of safety is how much output or sales level can fall before a business reaches its break even point.
What is the total revenue?
Total revenue is the total receipts from sales of a given quantity of goods or services. It is also the total income of a business.
What is the formula for total costs?
Multiplying the quantity of goods sold by the price of the goods.
What is the definition of total costs?
Total cost refers to the total expense incurred in reaching a particular level of output.
What are the benefits of break even?
Helps entrepreneur understand the level of risk involved in a start-up.
Focuses entrepreneur on how long it will take before a start-up reaches profitability
What are the limitations of break even?
Most businesses sell more than one product, so break-even for the business becomes harder to calculate.
Sales are unlikely to be the same as output – there may be some build up of stocks or wasted output too.
