Distinguish between return on investment and break-even point

What will be an ideal response?

Answer: The data used for the most important financial controls involve a basic cost-benefit analysis. For example, ratios relevant to the profitability of a given unit are constructed from revenue data (benefit) in relation to given amounts of investment (cost). The ratio is called return on investment (ROI), or alternatively, return on equity (ROE), and compares the amount of net profit before taxes (the numerator of the ratio) to the total amount of assets invested (the denominator).

Another financial measure is sometimes used for control purposes in business organizations. That measure is called the break-even point (BEP). Essentially, the BEP is where the selling price of a unit of a product (or service) minus its variable costs exceeds the fixed costs for that unit. The lower the fixed costs, the fewer the units of goods or services that need to be sold for a break-even point to be reached. Likewise, the lower the variable costs, the higher the profit per unit and, therefore, the fewer the units that need to be sold to reach that point.