Break even key terms.
What is a break-even analysis: A financial calculation that weighs the costs of a new
business, service or product against the unit sell price to determine the point at which
you will break even
Define the following
break-even point (BEP) - the point at which you will break even
Fixed Costs - an expense that does not change when sales or production volumes
increase or decrease.
Variable Costs - costs that change as the volume changes. Examples of variable costs
are raw materials, piece-rate labor, production supplies, commissions, delivery costs,
packaging supplies, and credit card fees
The break-even quantity (BEQ) The quantity of units sold at which you will break even
The break-even revenue - The point where your total revenue (sales or turnover) equals
total costs.
Unit contribution - represents the amount of money each unit of a product or service
contributes toward covering fixed costs and generating a profit.
The margin of safety (MOS). - How much volume can drop before you start losing money
Target price - estimate of a stock's future price, based on earnings forecasts and assumed
valuation multiples.
Target profit - Target profit is the expected amount of profit that the managers of a business
expect to achieve by the end of a designated accounting period.
