Firms that operate at break-even on an accounting basis are really losing the opportunity cost of capital on their investments.

Question

Quizplus · Accepted Answer

Break-even on an accounting basis means that the firm is just covering its costs, but it is not generating any profit. However, the firm is still using capital to invest in its operations, and by not earning a profit, it is losing the opportunity cost of that capital, which could have been invested elsewhere to earn a return.

Firms That Operate at Break-Even on an Accounting Basis Are