What does break-even analysis help a business determine?

Break-even analysis is a vital financial tool used by businesses to identify the point at which total revenues equal total costs, meaning no profit or loss occurs. The correct choice emphasizes that break-even analysis helps a business determine the minimum sales level needed to avoid losses. At the break-even point, a company has covered all its fixed and variable costs but has not yet begun to generate a profit.

Understanding this minimum sales threshold is crucial for businesses as it informs decision-making regarding pricing, cost management, and sales strategies. By determining the break-even point, a business can set performance targets and assess the viability of its operations.

While other options reference concepts that are related to the financial health of a business, they do not capture the primary focus of break-even analysis. For example, while maximizing profit or setting total revenue targets are important, break-even analysis specifically centers around the threshold of sales needed to remain profitable, making the interpretation of the correct answer clear and relevant.