Question

The Spector Company has sales of $550,000, and the break-even point in sales dollars is $418,000....

The Spector Company has sales of $550,000, and the break-even point in sales dollars is $418,000. Determine the Spector company's margin of safety as a percent of current sales. %?

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It is term used in finance widely which means investors only buys the securities when its price is below the intrinsic price. You can say when the price is below your estimated price then the deference between estimated and actual price is margin of safety. Lets say buying share whose worth is $10 you purchase at $7 having margin of safety in hands because it is quite possible that the worth would be $9 of share.

Margin of Safety

=

Sales - Sales at Break-Even Point

Sales

Margin of Safety

=  ($550,000 - $418,000) ÷ $550,000 = 24%
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