ADJUSTED BREAKEVEN Meaning and
Definition
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Adjusted breakeven refers to a financial calculation used to determine the point at which a business or project is neither making a profit nor incurring a loss, after considering certain adjustments or modifications. It is a measure primarily employed in analyzing the performance or viability of an enterprise.
The adjusted breakeven point is calculated by taking into account various additional costs or factors that would otherwise be excluded from a traditional breakeven analysis. These additional costs may include fixed overhead expenses, depreciation, interest payments, or non-recurring expenses.
This metric is particularly useful in decision-making processes, such as investment evaluations or project valuations. By incorporating these adjustments, stakeholders can gain a more accurate understanding of the level of sales, production, or revenue required to offset all relevant costs and expenses.
The adjusted breakeven point can assist businesses in assessing their financial stability and determining the level of activity necessary to cover both variable and fixed costs. It provides a comprehensive perspective on the minimum level of performance needed to avoid financial losses over a specific time frame, taking into consideration the nuances and intricacies of the business environment.
Overall, the adjusted breakeven point is an essential financial indicator that aids in managerial decision-making by determining the quantity or value needed to cover costs, providing businesses with key insights into their financial health.
Etymology of ADJUSTED BREAKEVEN
The term "ADJUSTED BREAKEVEN" is a combination of two words: "adjusted" and "breakeven".
The word "adjusted" comes from the Latin word "adjudicare", which means "to award" or "to judge". Over time, it evolved in the English language to mean "to alter" or "to modify". In the context of "ADJUSTED BREAKEVEN", it refers to making changes or modifications to reach a desired outcome.
The term "breakeven" is a compound word combining "break" and "even". The word "break" refers to the point of separation or interruption, while "even" means level or equal. In business and finance, the breakeven point represents the point at which total revenue equals total costs, resulting in neither profit nor loss.
