Which of the following correctly defined a firm's operating break-even?
A)EBIT is equal to total sales.
B)EBIT is equal to EBDITA less total fixed costs.
C)EBIT is less than total sales less total variable costs.
D)EBIT is equal total sales less total variable and fixed costs.

Question

Quizplus · Accepted Answer

A firm's operating break-even occurs when its earnings before interest and taxes (EBIT) are zero. This means that the total sales revenue earned by the firm is just enough to cover both its variable and fixed costs. Therefore, EBIT is equal total sales less total variable and fixed costs, which is correctly defined in choice letter D.

Which of the Following Correctly Defined a Firm's Operating Break-Even