What is it called when the total revenue equals total costs, meaning the business makes neither a profit nor a loss? It helps companies understand the minimum sales required to avoid losing money.

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BlackTom AI · Accepted Answer

First, let’s restate what the question is asking: it seeks the term for the situation where total revenue equals total costs, resulting in neither profit nor loss, and it mentions that this helps determine the minimum sales needed to avoid losing money.
Option 1: 'impermanent balance' — This phrase is not a standard term in managerial or financial accounting. It sounds vague and does not align with the established vocabulary used to describe when revenues cover costs. It would be misleading to call this a recognized concept.
Option 2: 'revenue balance' — While it hints at balancing revenue, this wording is not the conventional label for the break-even condition. In accounting and economics, there is a specific term that is widely used, and this option uses an uncommon phrasing.
Option 3: 'break even point' — This is the standard and precise term for the level of sales at which total revenue equals total costs, resulting in zero profit. It directly matches the definition described in the question and is taught as the critical threshold for profitability.
Option 4: 'even' — This is too generic and does not convey the specific financial concept. It lacks the clarity and established terminology used in business contexts to denote profitability thresholds.
In summary, among the choices, the third option uses the canonical term that professionals employ to describe the state where revenues cover costs exactly, and it also aligns with the idea of identifying the minimum sales needed to avoid losses. The other options either use nonstandard language or fail to capture the precise concept of zero profit at a given sales level.

VPAB13H3 F LEC01 Final Exam Quiz

What is it called when the total revenue equals total costs, meaning the business makes neither a profit nor a loss? It helps companies understand the minimum sales required to avoid losing money.

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