Break-even

For other uses, seeBreak-even (disambiguation).

Break-even(orbreak even), often abbreviated asB/Ein finance (sometimes called point of equilibrium), is the point of balance making neither aprofitnor a loss. It involves a situation when a business makes just enough revenue to cover its total costs.Any number below the break-even point constitutes a loss while any number above it shows a profit. The term originates in finance but the concept has been applied in other fields.

In economics

Main article:Break-even point

A simplified cash flow model shows the payback period as the time from the project completion to the breakeven.

In economics and business, specificallycost accounting,thebreak-even point(BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or loss has not been made, althoughopportunity costshave been "paid" and capital has received the risk-adjusted, expected return. In other words, it is the point at which the total revenue of a business exceeds its total costs, and the business begins to create wealth instead of consuming it.It is shown graphically as the point where the total revenue and total cost curves meet. In the linear case the break-even point is equal to the fixed costs divided by thecontribution marginper unit.

The break-even point is achieved when the generated profits match the total costs accumulated until the date of profit generation. Establishing the break-even point helps businesses in setting plans for the levels of production it needs to maintain to be profitable.

In finance

The accounting method of calculatingbreak-even pointdoes not include cost ofworking capital.The financial method of calculating break-even, calledvalue added break-even analysis,is used to assess the feasibility of a project. This method not only accounts for all costs, it also includes theopportunity costsof thecapitalrequired to develop a project.

In other fields

Innuclear fusionresearch, the termbreak-evenrefers to afusion energy gain factorequal to unity; this is also known as theLawson criterion.The notion can also be found in more general phenomena, such aspercolation.In energy, the break-even point is the point where usable energy gotten from a process equals the input energy.

Incomputer science,the term (used infrequently) refers to a point in the life cycle of aprogramming languagewhere the language can be used to code its owncompilerorinterpreter.This is also calledself-hosting.

In medicine, it is a postulated state when the advances of medicine permit every year an increase of one year or more of the life expectancyof the living,therefore leading to medical immortality,barring accidental death.

In Association football, the break-even requirement was adopted byUEFA.It is known asUEFA Financial Fair Play Regulations.Its purpose is to prohibit clubs from spending more money on transfers than they earn as businesses, i.e. revenue per each fiscal year excluding donations from sponsors or advertisers.