ECONOMICS

Detailed explanation-1: -A higher margin of safety means the company has more protection from a decline in sales. It acts as a buffer so that volatile sales periods are not detrimental to the business. A low margin of safety indicates the company does not have a wide buffer and needs to make some changes.

Detailed explanation-2: -The given statement is true. The margin of safety means the excess units produced over and above the breakeven point. The higher the margin of safety (MOS), the lower the risk of losses.

Detailed explanation-3: -The large margin of safety indicates the soundness of business.

Detailed explanation-4: -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.