Break-even (or break even) is the point of balance between making either a profit or a loss. The term originates in finance, but the concept has been applied widely since.
In economics & business, specifically cost accounting, the break-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 a loss has not been made, although opportunity costs have been "paid," and capital has received the risk-adjusted, expected return. 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 the contribution margin per unit.
The accounting method of calculating break-even point does not include cost of working capital. The financial method of calculating break-even, called value added break-even analysis, is used to assess the feasibility of a project. This method not only accounts for all costs, it also includes the opportunity costs of the capital required to develop a project.
In other fields
The notion can also be found in more general phenomena, such as percolation, and is rather similar to the critical threshold. In energy, the break-even point is the point where usable energy gotten from a process exceeds the input energy.
In computer science, the (less usual) term refers to a point in the life cycle of a programming language where the language can be used to code its own compiler or interpreter. This is also called self-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 expectancy of the living, therefore leading to medical immortality (barring accidental death).
In Gambling, when one has gained and then lost, or lost and then gained, returning to the amount of money they had upon commencement and walks away, they are said to have broken even.
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- Brealey, R., Myers, S., Marcus, A., Maynes, E., Mitra, D. 2009. Fundamentals of Corporate Finance. McGraw-Hill Ryerson. USA. pp. 284. ISBN 978-0-07-098403-5
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