Margin of Safety
Answered
Can someone please throw some light on the concept of “Margin of Safety” by Benjamin Graham and David Dodd?
Best answer
Margin of Safety = Actual Sales – Breakeven Sales
Margin of safety is used in break-even analysis to indicate the amount of Sales that are above the break-even point. In other words, the margin of safety indicates the amount by which a company’s sales could decrease before the company will become unprofitable.
Margin of safety is the extent by which actual or projected sales exceed the break-even sales. It may be calculated simply as the difference between actual or projected sales and the break-even sales.
Margin of Safety = Budgeted Sales − Break-even Sales
