Definition of Balance Point

This concept is normally applied in the sphere business and is used to indicate that a business does not move forward or backward. As its name indicates, this is the point at which the sales obtained allow you to assume all your costs, both fixed and variable.

A key piece of information to know the economic situation of a company

The point of Balance in a company it is based on the correct ratio between sales and total costs. If both concepts are equal there is equilibrium because the utility is equal to zero. In other words, there are no losses or gains. Obviously, this type of analysis is part of the income statement in which a series of issues are recorded, such as variable costs, fixed costs and margin contribution.

The equilibrium point is an undesirable business situation, since there are no losses but no gains. In this way, it could be said that this point is the minimum situation to which a company should aspire, since below it there are more losses than profits.

The breakeven point allows to know what is the level of sales necessary to meet the expenses associated with a company. For this reason, it is understood that this indicator is a tool basic to know the solvency of a business and its level of cost effectiveness.

In business, the break-even point is given other possible names, such as deadlock or break-even. If a vehicle is in neutral, it does not move forward or backward and this situation can be extrapolated to the business world.

An important tool for making decisions

Know the equilibrium point in relation to a economic activity it is a tool with a high strategic value. In this sense, from the objective data in which the deadlock of an activity is indicated, it is already possible to design a strategy business to seek profitability.

The concept of balance in relation to people

In everyday life we ​​use the term equilibrium in many senses. Thus, we say that a soccer team is balanced when its attack and defense present an adequate proportion.

In the personal sphere, a person's situation is balanced when there is no imbalance striking (for example, someone with a lot of money but in poor health has a clear imbalance in his life). In some way, all human situations, both individual and collective, can be expressed from the idea of ​​balance or imbalance.

Photos: Fotolia - Dmitry Guzhanin / Adiano