【A.06.07】What if the sales drop < MOS?

Briefing Note
Reading comprehension is a skill that empowers lifelong learning intelligence for a better self.
It’s important to note that..

✅ ..the margin of safety is essentially a cushion that provides a safety net for the business.


If sales drop less than the margin of safety..

✅ ..means that the actual sales of a business are still above the minimum level of sales required to cover its fixed costs or so-called the break-even point.

✅ ..the business is selling above breakeven point, as a result, it is still making profits.

✅ ..a positive sign since the business is still generating enough sales revenue to cover its operating expenses and is not in danger of running the business at a loss.


If sales drop too much..

✅ ..which is more than the margin of safety, that means the sales level falls below the break-even point, and the business will start to incur losses as a result.


It’s always advisable for businesses..

✅ ..aim for a margin of safety that is significantly higher than their current level of sales.


A drop in sales, even if it is below the margin of safety..

✅ ..may still signal that the business is facing some challenges or that there are opportunities for improvement.


Businesses should continually..

✅ ..monitor their sales and profitability, analyse the reasons for any changes, and adjust their strategies accordingly to ensure long-term success.


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