Starting a business can be pricey. Breakeven analysis and cost-volume-profit analysis will help you understand when—and if—your business will start to recover those costs and begin making a profit. Understanding your breakeven point will help you to determine how much you need in revenue to keep your business going. Accounting professors Jim and Kay Stice walk through the breakeven equation, and cover types of costs, contribution margin, breakeven point, and net income. They also explain what each term means, and the importance of each, and offer examples from popular real-world companies.
Want to learn more? Learn about three types of accounting—financial, managerial, and income tax—in their Accounting Foundations course.
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