ECONOMICS

Detailed explanation-1: -What is Margin of Safety? The margin of safety is the difference between the amount of expected profitability and the break-even point. The margin of safety formula is equal to current sales minus the breakeven point, divided by current sales.

Detailed explanation-2: -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-3: -As a financial metric, the margin of safety is equal to the difference between current or forecasted sales and sales at the break-even point. The margin of safety is sometimes reported as a ratio, in which the aforementioned formula is divided by current or forecasted sales to yield a percentage value.

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.

Detailed explanation-5: -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. Experts use this financial ratio for break-even analysis and forecasting to assess the existing cushion in actual or budgeted sales before the firm bears the loss.