ECONOMICS

Detailed explanation-1: -Margin of Safety in Accounting In accounting, the margin of safety is the difference between current/forecasted sales and sales at the break-even point.

Detailed explanation-2: -The margin of safety is the difference between actual sales and break-even sales, while the degree of operating leverage (DOL) shows how a company’s operating income changes after a percentage change in its sales.

Detailed explanation-3: -Margin of safety measures the difference between real and break-even sales. Break-even point measures the volume of sales where all costs are covered. Both figures examine risk, but break-even point only goes as far as determining where the risk level is zero.

Detailed explanation-4: -The margin of safety is the amount sales can fall before the break-even point (BEP) is reached and the business makes no profit. This calculation also tells a business how many sales it has made over its BEP.