Break Even Ratio Solution

STEP 0: Pre-Calculation Summary
Formula Used
Break Even Ratio = (Debt Servicing Costs+Operating Expenses)/Gross Operating Income
BER = (DSC+OE)/GOI
This formula uses 4 Variables
Variables Used
Break Even Ratio - Break Even Ratio. is the percentage of income that covers the expenses of owning and operating an income-producing property.
Debt Servicing Costs - Debt Servicing Costs refer to the total amount of money required to cover interest payments and principal repayments on a loan or debt obligation within a specific period.
Operating Expenses - Operating Expenses are the ongoing costs incurred to maintain and manage a property or business, including utilities, maintenance, insurance, and property management fees.
Gross Operating Income - Gross Operating Income is the total revenue generated from a property before deducting operating expenses, vacancy losses, and other non-revenue items.
STEP 1: Convert Input(s) to Base Unit
Debt Servicing Costs: 7600 --> No Conversion Required
Operating Expenses: 8000 --> No Conversion Required
Gross Operating Income: 11500 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
BER = (DSC+OE)/GOI --> (7600+8000)/11500
Evaluating ... ...
BER = 1.35652173913043
STEP 3: Convert Result to Output's Unit
1.35652173913043 --> No Conversion Required
FINAL ANSWER
1.35652173913043 1.356522 <-- Break Even Ratio
(Calculation completed in 00.004 seconds)

Credits

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Created by Keerthika Bathula
Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad
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Verified by Aashna
IGNOU (IGNOU), India
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Break Even Ratio Formula

Break Even Ratio = (Debt Servicing Costs+Operating Expenses)/Gross Operating Income
BER = (DSC+OE)/GOI

What is Break Even Ratio ?

The break-even ratio is a financial metric used in real estate investment to assess the income needed to cover the expenses of owning and operating an income-producing property. It is calculated by dividing the property's total operating expenses by its gross potential income. The resulting ratio represents the percentage of income that must be generated to reach the break-even point, where total expenses equal total income. A lower break-even ratio indicates that the property requires less income to cover its expenses, which is generally viewed as more favorable for investors. Conversely, a higher break-even ratio suggests that a larger percentage of income is needed to cover expenses, potentially indicating a riskier investment or less profitability. Investors use the break-even ratio as a tool to evaluate the financial viability and risk of a property before making investment decisions.

How to Calculate Break Even Ratio?

Break Even Ratio calculator uses Break Even Ratio = (Debt Servicing Costs+Operating Expenses)/Gross Operating Income to calculate the Break Even Ratio, The Break Even Ratio is the percentage of income that covers the expenses of owning and operating an income-producing property, calculated by dividing total operating expenses by gross potential income. Break Even Ratio is denoted by BER symbol.

How to calculate Break Even Ratio using this online calculator? To use this online calculator for Break Even Ratio, enter Debt Servicing Costs (DSC), Operating Expenses (OE) & Gross Operating Income (GOI) and hit the calculate button. Here is how the Break Even Ratio calculation can be explained with given input values -> 1.356522 = (7600+8000)/11500.

FAQ

What is Break Even Ratio?
The Break Even Ratio is the percentage of income that covers the expenses of owning and operating an income-producing property, calculated by dividing total operating expenses by gross potential income and is represented as BER = (DSC+OE)/GOI or Break Even Ratio = (Debt Servicing Costs+Operating Expenses)/Gross Operating Income. Debt Servicing Costs refer to the total amount of money required to cover interest payments and principal repayments on a loan or debt obligation within a specific period, Operating Expenses are the ongoing costs incurred to maintain and manage a property or business, including utilities, maintenance, insurance, and property management fees & Gross Operating Income is the total revenue generated from a property before deducting operating expenses, vacancy losses, and other non-revenue items.
How to calculate Break Even Ratio?
The Break Even Ratio is the percentage of income that covers the expenses of owning and operating an income-producing property, calculated by dividing total operating expenses by gross potential income is calculated using Break Even Ratio = (Debt Servicing Costs+Operating Expenses)/Gross Operating Income. To calculate Break Even Ratio, you need Debt Servicing Costs (DSC), Operating Expenses (OE) & Gross Operating Income (GOI). With our tool, you need to enter the respective value for Debt Servicing Costs, Operating Expenses & Gross Operating Income and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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