Question

Margin of safety is ____ to net current assets to get working capital

Answer 1

The difference between the amount of expected profitability and the break-even point.

• The margin of safety is the difference between the amount of expected profitability and the break-even point.
• The margin of safety formula is equal to current sales minus the breakeven point, divided by current sales.

What is margin of safety?

• Margin of safety is a principle of investing in which an investor only purchases securities when their market price is significantly below their intrinsic value.
• In other words, when the market price of a security is significantly below your estimation of its intrinsic value, the difference is the margin of safety.

What is margin for working capital?

• Working capital margin refers to the additional amount that a business must maintain over and above its regular working capital required to meet unforeseen expenses.
• Working Capital margin in terms of funding, is what a lender is going to earn by providing a working capital loan to businesses.

What is margin of safety with example?

• In other words, all sales revenue that a company collects over and above its break-even point represents the margin of safety.
• For example, if actual sales for the month of January 2020 are $250,000 and the break-even sales are $150,000, the difference of $100,000 is the margin of safety.

Learn more about margin here,

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