Margin of Safety
Margin of safety represents the strength of the business. It enables a business to know what is the exact amount it has gained or lost and whether they are over or below the break even point.
margin of safety = (current output - breakeven output)
margin of safety% = (current output - breakeven output)/current output × 100
When dealing with budgets you would instead replace "Current output" with "Budgeted output".
If P/V ratio is given then profit/ PV ratio
Read more about this topic: Break-even (economics)
Famous quotes containing the words margin of, margin and/or safety:
“Then he rang the bell and ordered a ham sandwich. When the maid placed the plate on the table, he deliberately looked away but as soon as the door had shut, he grabbed the sandwich with both hands, immediately soiled his fingers and chin with the hanging margin of fat and, grunting greedily, began to much.”
—Vladimir Nabokov (1899–1977)
“Everything that explains the world has in fact explained a world that does not exist, a world in which men are at the center of the human enterprise and women are at the margin “helping” them. Such a world does not exist—never has.”
—Gerda Lerner (b. 1920)
“Man gives every reason for his conduct save one, every excuse for his crimes save one, every plea for his safety save one; and that one is his cowardice.”
—George Bernard Shaw (1856–1950)