Break-Even Analysis is a financial analysis that identifies the point at which expenses equal gross revenue, resulting in neither profit nor loss. It is a crucial tool for businesses to determine the minimum sales volume required to avoid losses.
Cost-Volume-Profit (CVP) analysis is a method used by businesses to understand the inter-relationships between cost, volume, and profit. It helps in decision-making by determining the break-even point, analyzing the profit potential of a company, and evaluating the impact of different levels of sales and production.
Occupancy level is a crucial metric in real estate and hospitality industries, indicating the percentage of currently rented units in a building, city, neighborhood, or complex.
Return on investment equal to the original marketing expenditure; also known as payback. When a company recovers its investment plus the expected built-in return from launching or reintroducing a new product or service, it has realized a profit from its original capital outlay. A company's payout represents the minimum amount of dollar sales that must be generated to offset the cost of an advertising program.
A Profit-Volume (PV) Chart, also known as a Profit-Volume graph, visually represents the relationship between a company's profits and its sales volume. It provides valuable insights into the break-even point, the margin of safety, and the dynamics between fixed and variable costs, aiding in decision-making and strategic planning.
A metric used to measure the relationship between profit and sales volume, commonly referred to as the Contribution Margin Ratio, which indicates how much revenue from sales contributes to covering the fixed costs and generating profit.
The safety margin is the excess of actual sales over break-even sales, providing a buffer that measures how much sales can drop before incurring a loss.
