Break-even

Question 1

What are the benefits of break-even?

Answer 1

• can help businesses set targets (shows when a business will make a profit)
• helps a business decide how much it should sell its products for.
• analysis can help convince a bank to give a loan

Question 2

What are the limitations of break-even?

Answer 2

• most businesses sell more than one product so break-even becomes hard to calculate.
• sales are unlikely to be the same as output- there may be build up of stock or wasted output.