Dictionary of Accounting Terms: margin of safety
margin of safety
difference between the actual level of sales and break-even sales It is the amount by which sales revenue may drop before losses begin and is often expressed as a percentage of budgeted sales:
The margin of safety is often used as a measure of operating risk The larger the ratio, the safer the situation is since there is less risk of reaching the break-even point.
Dictionary of Business Terms: margin of safety
margin of safety
measure of the financial position of a company; amount at which present sales exceed the break-even sales. For example, if actual sales are $10,000 and the break-even point is $8,000, the margin of safety is $2,000.
