What does 'break-even analysis' determine?

Break-even analysis is a crucial financial tool that helps businesses understand the relationship between their costs, revenues, and the volume of sales needed to avoid losses. It specifically identifies the break-even point, which is when total revenues equal total costs. At this juncture, the company is not making a profit, but it is also not incurring a loss.

This analysis is particularly useful for decision-making, as it allows businesses to determine the minimum sales volume they must achieve to cover all their expenses. Understanding the break-even point enables companies to set sales targets and pricing strategies effectively, assess the viability of new products, and make informed operational decisions.

While the other options touch on aspects of business finance, they do not directly relate to the break-even analysis concept. For instance, determining profit goals, understanding cash flow effects, or projecting expenses for a new project, while important, serve different analytical purposes.