Financial Terms Break

# Definition of Break

## Break

A rapid and sharp price decline.

# Related Terms:

## Break-Even

This is a term used to describe a point at which revenues equal costs.

## Break-even analysis

An analysis of the level of sales at which a project would make zero profit.

## break-even analysis

Analysis of the level of sales at which the company breaks even.

## Break-Even Analysis

An analytical technique for studying the relationships between fixed cost, variable cost, and profits. A breakeven chart graphically depicts the nature of breakeven analysis. The breakeven point represents the volume of sales at which total costs equal total revenues (that is, profits equal zero).

## break-even chart

a graph that depicts the relationships among revenues, variable costs, fixed costs, and profits (or losses)

## Break-even lease payment

The lease payment at which a party to a prospective lease is indifferent between
entering and not entering into the lease arrangement.

## Break-even payment rate

The prepayment rate of a MBS coupon that will produce the same CFY as that of
a predetermined benchmark MBS coupon. Used to identify for coupons higher than the benchmark coupon
the prepayment rate that will produce the same CFY as that of the benchmark coupon; and for coupons lower
than the benchmark coupon the lowest prepayment rate that will do so.

## break-even point (BEP)

the level of activity, in units or dollars, at which total revenues equal total costs

## Break-even tax rate

The tax rate at which a party to a prospective transaction is indifferent between entering
into and not entering into the transaction.

## Breakeven point

The point at which total costs equal total revenue, i.e. where there is neither a profit nor a loss.

## breakeven point

The annual sales volume level at which total contribution
margin equals total annual fixed expenses. The breakeven point is only a
point of reference, not the goal of a business, of course. It is computed by
dividing total fixed expenses by unit margin. The breakeven point is
quite useful in analyzing profit behavior and operating leverage. Also, it
gives manager a good point of reference for setting sales goals and
understanding the consequences of incurring fixed costs for a period.

## Breakeven point

The sales level at which a company, division, or product line makes a
profit of exactly zero, and is computed by dividing all fixed costs by the average
gross margin percentage.

## Breakout

A rise in a security's price above a resistance level (commonly its previous high price) or drop
below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing
move in the same direction. Can be used by technical analysts as a buy or sell indicator.

## Cash-flow break-even point

The point below which the firm will need either to obtain additional financing
or to liquidate some of its assets to meet its fixed costs.

## Deal Breaker

A deal breaker is a significant issue relating to the proposed financing between the prospective investor and the entrepreneur that needs to be resolved in order to close the deal.

## contribution margin

An intermediate measure of profit equal to sales revenue
minus cost-of-goods-sold expense and minus variable operating
expenses—but before fixed operating expenses are deducted. Profit at
this point contributes toward covering fixed operating expenses and
toward interest and income tax expenses. The breakeven point is the
sales volume at which contribution margin just equals total fixed
expenses.

## Du Pont system

A breakdown of ROE and ROA into component ratios.

## fixed expenses (costs)

Expenses or costs that remain the same in amount,
or fixed, over the short run and do not vary with changes in sales volume
or sales revenue or other measures of business activity. Over the
longer run, however, these costs increase or decrease as the business
grows or declines. Fixed operating costs provide capacity to carry on
operations and make sales. Fixed manufacturing overhead costs provide
production capacity. Fixed expenses are a key pivot point for the analysis
of profit behavior, especially for determining the breakeven point and for
analyzing strategies to improve profit performance.

## Income Statements

A financial statement that displays a breakdown of total sales and total expenses.

## Inventory Shrinkage

A shortfall between inventory based on actual physical counts and inventory
based on book records. This shortfall may be due to such factors as theft, breakage, loss, or
poor recordkeeping.

## Margin of safety

A measure of the difference between the anticipated and breakeven levels of activity.

## margin of safety

the excess of the budgeted or actual sales
of a company over its breakeven point; it can be calculated
in units or dollars or as a percentage; it is equal to
(1 - degree of operating leverage)

## Policyholder

This is the person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation. There are instances in marriage breakup (or relationship breakup with dependent children) where appropriate life insurance on the support provider, owned and paid for by the ex-spouse receiving the support is an acceptable method of ensuring future security.

## practical standard

a standard that can be reached or slightly
exceeded with reasonable effort by workers; it allows for
normal, unavoidable time problems or delays and for
worker breaks; it is often believed to be most effective in
inducing the best performance from workers, since such
a standard represents an attainable challenge

1) Amount paid for a bond above the par value.
2) The price of an option contract; also, in futures
trading, the amount the futures price exceeds the price of the spot commodity. Related: inverted market premium payback period. Also called break-even time, the time it takes to recover the premium per share of a
convertible security.

## Segment reporting

A portion of the financial statements that breaks out the results of