Reading comprehension is a skill that empowers lifelong learning intelligence for a better self.
The margin of safety (MOS)..
✅ ..a financial concept used to measure the difference between the current or projected level of sales and the break-even point of sales.
✅ ..measures the extent to which a company’s sales can decline before it starts to incur losses.
✅ ..the margin of safety (MOS) in percentage (%) can be expressed as:
✅ Current or projected Sales:
🚩 The actual or expected level of sales for a given period.
✅ Breakeven Sales:
🚩 The sales level at which a company’s total revenue equals its total costs and expenses, resulting in zero profit zero loss.
✅ ..the percentage of the current or expected sales that exceed the break-even sales point.
✅ ..Briefly, let’s say a company’s current or projected sales are $100,000 and a break-even sales point of $60,000, the margin of safety would be calculated as follows:
✅ That interprets the company’s sales could decline by up to 40% before it starts to incur losses.
✅ ..the greater the cushion a company has against unexpected declines in sales.