Can You Explain Break Even Point And Its Limitations?


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The breakeven is the point at which gains equals losses in general. It can also be explained as the point in investment where sales or revenues equals expenses. Therefore, there is no profit or loss incurred at breakeven point. This makes it a very important factor in managing a business, since the break even point is the lower limit of profit when prices are set and margins are determined.
For example, if one starts to operate a small with a total investment of $5000. With a monthly profit of $500, one should expect a break even at the 10th month.
Its important to note knowledge of breakeven point helps people to decide on whether to begin a business or not. Sooner the break even point is reached, the better are the chances of that business being started. Nobody would want to wait years before which he can take back the money he invested in starting the firm

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