UK Accounting Glossary
The break-even point for any investment is the price at which an investor neither makes nor loses money on that investment. An investor’s break-even point must include the recoupment of all fees, commissions and other expenses associated with the purchase and sale of the investment. When trading options, the break-even point for a call option is the option’s strike price plus its premium. For a put option, the break-even point is the strike price of the option minus the option’s premium. For a business, the break-even point is the point at which a company’s net income precisely equals it costs. In the case of real estate, the break-even point occurs when rental income exactly matches all debt expenses. Knowing an investment’s break-even point is considered essential for effective money management.
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This glossary post was last updated: 4th February 2020.