The firm's__________ is the level of sales necessary to cover all operating costs, i.e., the point at which EBIT = $0.
A) total break-even point
B) cash break-even point
C) financial break-even point
D) operating break-even point

Question

Quizplus · Accepted Answer

The operating break-even point is the level of sales necessary to cover all of a company's variable and fixed operating costs, which is the point where EBIT is equal to $0. The other options do not accurately describe this concept. The total break-even point refers to the level of sales necessary to cover all costs, including interest and taxes. The cash break-even point is the level of sales necessary to cover all cash expenses, including investments in working capital. The financial break-even point is the level of sales necessary to cover all costs and generate a desired return on investment.

The Firm's__________ Is the Level of Sales Necessary to Cover