Introduction
Break-even analysis is a financial tool used to determine when a business will be able to cover its expenses and start making a profit. It calculates the point where total cost equals total revenue.
Key Formula
Break-Even Point (BEP) = Fixed Costs / (Selling Price per Unit – Variable Cost per Unit)
Importance
- Helps in pricing decisions.
- Assists in planning profits and sales targets.
- Identifies the minimum performance required to avoid loss.
Conclusion
Break-even analysis is vital for rural entrepreneurs to plan their finances and set realistic goals.