ECONOMICS

Detailed explanation-1: -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. Corporate Finance Institute.

Detailed explanation-2: -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-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.

Detailed explanation-5: -The term “break-even sales” refers to the sales value at which a company earns no profit no loss. In other words, the break-even sales are the dollar amount of revenue that precisely covers the fixed expenses and the variable expenses of a business.