Business finance glossary
Break-even point
The revenue level at which total sales equal total costs — the point where the business stops losing money.
The break-even point is the unit volume or revenue level at which total revenue equals total costs — fixed plus variable. At break-even, profit is exactly zero. Above break-even, every additional unit sold generates profit at the contribution margin rate. The formula: Break-even revenue = Fixed Costs / Contribution Margin Ratio, where Contribution Margin Ratio = (Revenue − Variable Costs) / Revenue. For a business with $200,000 in fixed costs and a 40% contribution margin, break-even revenue is $200,000 / 0.40 = $500,000. Break-even analysis is foundational for pricing decisions, new product launches, and loan feasibility assessments.