Break-even

This condition exists when a firm’s sales revenues cover all of its production costs.

Break-even point (BEP)

This is the point on a break-even chart where the firm’s total costs equal its total revenue, shown by the intersection of the TR and TC curves.

Break-even quantity (BEQ)

The quantity of sales (sales volume) required for a firm to reach break-even. It is found by using the formula: BEQ = Fixed costs / (Price – Average variable cost).

Break-even revenue

This is the value of the output needed to break-even.

Loss

This occurs when a firm’s total costs are greater than its total revenues, i.e. the business is unprofitable.

Margin of safety
(safety margin)

The numerical difference between how much a business sells and its break-even quantity.

Profit

The financial surplus that remains when a firm's total costs (TC) of production are deducted from its total sales revenues (TR). Hence, profit = TR – TC.

Target price

This is the amount customers need to pay per unit in order for the firm to break-even or to reach a particular target profit

Target profit

This is the amount of profit that a firm aims to earn within a given time period.

Target profit output

Also known as the target profit quantity, this refers to the quantity of sales required to reach the firm’s target profit.