BREAK-EVEN SALES Definition

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BREAK-EVEN SALES see BREAK-EVEN POINT.

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OVERLEVERAGED is a balance sheet condition where the entity is incapable of servicing its debt load (interest payments) with available capital sources. Simply put, the entity is carrying too much debt.

PAYBACK PERIOD, in capital budgeting, is the length of time needed to recoup the cost of CAPITAL INVESTMENT. The payback period is the ratio of the initial investment (cash outlay, regardless of the source of the cash) to the annual cash inflows for the recovery period. The major shortcoming for the payback period method is that it does not take into account cash flows after the payback period and is therefore not a measure of the profitability of an investment project. For this reason, analysts generally prefer the DISCOUNTED CASH FLOW methods of capital budgeting; primarily, the INTERNAL RATE OF RETURN and the NET PRESENT VALUE methods.

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