Break-even point calculation is a business tool used to determine when a company’s profits will equal its expenses. To calculate the break-even point, one must compare fixed costs (expenses that occur regardless of sales volume) with variable costs (expenses that change with sales volume). This analysis serves to identify the amount of money that the company needs to make in order to cover its expenses and turn a profit. By understanding their break even point, companies can better assess whether or not they are likely to reach profitability in any given period.