breakeven analysis

Study of the mathematical relationship between costs and sales revenue, under a given set of assumptions regarding the firm's fixed costs and variable costs. In this financial analysis, the objective is to determine (in manufacturing) number of products that must be sold at a given price to cover the costs, or (in project financing) number of months or years required by the forecasted total net cash flow to equal estimated total project cost. An integral part of financial planning, it is performed either by using a breakeven-formula or by drawing a breakeven graph.