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I value the break even point diagram of a company as a tool to understand the minimum investment of the company, and the percentage of input needed to increase sales and profit.
Value of Break even for analysis:-
The company to whom evaluate ,Since the break even contains the information regarding the total cost , variable cost , fixed cost and the revenue (in terms of units as well as Amount ). It all shows the level of activities carried out by that company meaning that the company is absorbing the cost and minmum level of units to be sold to avoid the loss by the company.
The break even also help to manage the targed profit and also the mix of unit to be sold to achieve the break ven sals revenue.
Further, the break even also serve the analysis as a yard stick to evaluate the performance of the company.
Agreed with Mr. Zafar Abbas Minhas answer.
AGREED WITH ZAFAR ABBAS MINHAS,,, NICE SPECIFIC ANSWER
It shows at what sales quantity and when the business coveres its costs and what profitability is anticipated.
when all expenses are being meet by the sales,,, NO PROFITS AT THIS STAGE.
Agree with Mr. Aziz ur Rehman
in the simplest word it is the operational expense required to run the company without profit.
The Point where Expense Line on Diagram Crosses the Revenue Lone is called a Breakeven Point; means company is at No Profit no Loss stage.
The break-even value diagram is a valuable tool when anlaysing actual/expected revenues versus costs or gains versus losses.
The value of the diagram is that it is an a visual representation (snapshot view) of the most relevant information that we beed to know at a glance ... easy to understand and comprehend and to communicate/discuss with others too.
Break-even point analysis is very versatile and can be scaled up to the entire company, and down to a specific product, service, event, department, or function within the company
Agree with most answers given but I feel that apart from the general analysis, it would be viewed in different ways by different levels of the organisation - owners, executives, bankers, acquisition and mergers specialists. Hence "value" maybe defined by each of these person in different ways.
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