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The difference between the intrinsic value of a stock and its market price.
In Break even analysis (accounting), margin of safety is how much output or sales level can fall before a business reaches its breakeven point.
Margin of safety is the amount of sales drop that a company can tolerate without incurring loss. Simply put, it is the difference between the actual /projected sales and the break even point. It can be improved by increasing sales units or sales price, or decreasing variable cost.
Safety margin:
It is the difference between the sales (current) or expected and between breakeven sales (the value of a tie). And refers to the amount of a potential decline in sales that can occur without loss of starting operations.
And is calculated as follows: safety margin = sales - the value of the equalizer.
Or as a percentage of sales: safety margin = (sales - the value of a tie) \\\\ Sales
And notes that: operations = income margin of safety * contribution margin rate
Through the previous equation, we find ways to improve the margin of safety is:
Increase the value of sales
Reduce costs to sell
