What aspect does cost-volume-profit analysis help a company understand?

Cost-volume-profit analysis is a fundamental financial tool used by companies to understand the relationship between cost, sales volume, and profit. This analysis provides insights into how fluctuations in costs and changes in sales volume affect a company's bottom line. Specifically, it helps in determining the break-even point, which is the level of sales at which total revenues equal total costs, resulting in neither profit nor loss.

By analyzing different scenarios of sales volume and cost structures, businesses can assess how various levels of production affect profitability. For instance, if a company increases its production, the analysis can show how that impacts overall income, taking into account fixed and variable costs. This understanding aids in strategic decision-making, such as setting sales targets, pricing strategies, and budgeting, which are critical for achieving financial goals.

In comparison, while the other choices discuss important business concepts, they do not directly relate to the primary function of cost-volume-profit analysis. This analysis is specifically focused on the interplay between costs, sales volumes, and profitability, making it an essential tool for financial planning and analysis.