Why a Break-Even Analysis Matters

Business people laughing at lunch in a cafe outdoorsKnowledgeable clients are better clients.

By Ed Mendlowitz
Call Me Before You Do Anything: The Art of Accounting

One of the best tools to evaluate a business and get a quick handle on the knowledge of the owner or manager is the break-even analysis.

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Break-even analysis is a simple calculation that tells how much sales are needed to break even, and how much will be lost or earned when sales fall short of that amount or exceed it. A key part of this is to determine the “product lines” a business has and its direct cost structure.