Explain Break-Even analysis.

Break-even analysis is a financial tool used by businesses to determine the point at which total revenue equals total costs, resulting in neither profit nor loss. It helps businesses understand the level of sales needed to cover all fixed and variable costs and reach the break-even point. The break-even point is calculated by dividing total fixed costs by the contribution margin per unit, where the contribution margin represents the difference between sales revenue and variable costs per unit. By comparing the break-even point to actual or projected sales volume, businesses can assess their financial viability, set pricing strategies, and make informed decisions about production, sales, and marketing efforts. Break-even analysis also enables businesses to evaluate the impact of changes in costs, prices, and sales volume on profitability and risk management. It provides valuable insights into the relationship between costs, revenue, and profitability, helping businesses optimize their operations and maximize financial performance.