Glossary

Cash break-even

The volume at which cash coming in covers cash going out, which is not the same as accounting break-even.

Accounting break-even counts depreciation, an expense with no cash attached, and ignores loan principal, owner draws and stock bought before it sells — all cash out with no expense recorded. The two figures therefore sit at different volumes, and between them a business is profitable on paper while losing money in the bank. That gap is the commonest way a healthy-looking small business runs out of cash, and its size is specific to each business's debt, drawings and inventory.

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