What is the breakeven point?

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The breakeven point is the situation when revenues or production volumes fully cover costs.

When an organization reaches a threshold, it vietnam telegram database means that the business has "broken down." Income above the breakeven point is a profit, and if it is below, it is a loss.

The break-even point always allows you to make the right management decisions. After all, these are not just numbers, but a whole series of measures aimed at reviewing the company's activities when planning production expansion and, in general, to assess financial stability.



Formula for calculating profitability
The profitability formula looks like this:

Where profit is the difference between income and expenses. And cost price is the amount of necessary investments in the organization's activities.

Example . Entrepreneur Vasily was able to earn 3 million rubles in a year, and this is his net profit. Now this number does not give us any useful information.

3 million rubles - sounds proud. But it is not clear whether this is a positive result or a loss, and to what coefficient to apply this amount.

Let's say Vasily invested 3 million rubles in the organization at the start. In this case, the return on equity is high, because it is 100%. But if his investments were 300 million rubles at the beginning, then the business showed 1%, and this is already a loss.

Another example . The income of entrepreneur Vasily was 800 thousand rubles. At the same time, the revenue was 2 million rubles. The profitability formula looks like this:

P = 800,000/2,000,000 * 100% = 40%

The example shows the percentage of total revenue that is accounted for by profit.