Break-even time (BET) can be defined as Capital budgeting method that measures the time taken from the start of a project (the initial idea date) to when the cumulative the present value of the cash inflows of a project to equal the present value of the total cash outflows.
Break-Even Time (BET) FAQs
Break-Even Time (BET) is a financial metric used to measure the amount of time required for a business to cover its fixed and variable costs through generated revenue.
Break-Even Time can be calculated by dividing the total fixed and variable costs of a business by its average profit per period.
Knowing Break-Even Time allows businesses to appropriately set pricing, plan and manage resources, measure operational efficiency more accurately, and forecast future performance.
Break-Even Time is only as accurate as the data and assumptions used to calculate it. Therefore, businesses must be diligent in ensuring their data and assumptions are reliable when calculating Break-Even Time.
Businesses should recalculate their Break-Even Time on a regular basis to account for changes in the market and their operations. Generally, it is recommended that Break-Even Time is recalculated every month or quarter.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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