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Break even, still.

Posted by R. Berg on September 01, 2004

In Reply to: Break even, still. posted by Lotg (OZ) on September 01, 2004

: : : : : OK, well in answering the previous post, I've raised a query in my own mind. The term 'break even'. I know what it means, but literally it's an odd term. How can you 'break even'? Traditionally, to break even is to end up where you started - ie. no loss, no win. But if I take the words literally, it suggests that you actually break through that 'even' point, which suggests either winning or losing. Can anyone explain to me how this term came about and what I'm missing here?

: : : : Goddess, look up breakeven chart on Google and the concept will be clear. A breakeven chart is a way of displaying data concerning an economic activity. It allows for the display of the total of expenses (ususally includes the fixed costs and those variable with volume) and the revenues or income associated with producing and selling that volume of wigits or whatever. Breakeven refers to the 'breakeven point' -- the volume level at which the revenues and the costs are even. Presumably, after that point is reached, when the prices are set over the unit cost, the result will be a profit on each additional unit.

: : Definitions of phrases like "break even" often, perhaps almost always, neglect to show the connection between the normal use of the key words and this particular use. What does "break" mean in this case? The OED, which gives the standard definition, is not of much use in finding this connection. My own theory, which is worth as much as most "folk-etymologies," is that asking the question, Which way did it break? might be helpful. Perhaps there's no simple analogy to breaking an array of billiard balls, but we often hear that something broke to the right or to the left, or that the break came in such and such a place. Which way do the accounts break, towards credits or debits? I've never heard that, of course, but someone imaginative might see how things might break in such a fashion as to leave the bettor, the entrepreneur, the investor, exactly where he started. SS

: Yes Smokey, it was the 'break' bit I was focussing on and your theory makes some sense. The way I was looking at it was to visualise 'even' as a given point, and to 'break through' that point, might be to break even, but as you say, which way does it break? So it tends to imply 'breaking through to' rather than just 'through'.

To follow through on this idea: If you're doing business or holding an investment at a loss, you look forward hopefully/anxiously to reaching the zero point, where income equals outlay and you've made back your expenses. That dollar figure is a breakpoint in that it divides profit from loss.