Margin of Safety

The term ‘Margin of Safety’ is a self explanatory term. It shows the amount of sales that act as a safety cover for an enterprise to help it earn profits. From accounting point of view, Margin of safety is the difference between actual sales and sales at break even point. It represents an amount of sales that contributes to the profits of the company i.e. the amount of sales which is over and above the sales at break even point. For example, If break even point sales of a company are $20,000,000…