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Explain the meaning of the Margin of safety and the Margin of safety ratio and provide...

Explain the meaning of the Margin of safety and the Margin of safety ratio and provide an example for the Margin of safety and the Margin of safety ratio.(100 to 200 words)

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Expert Solution

MARGIN OF SAFETY

margin of safetyis princple of investing in which an investor only purchase securities when thier market price is signifantly below thier intrisic value ie whhen hte maket price of secruity is signifacntly below your estiamed intrinic value the differnce is margin of safety

example- market prcie of govt bondsi is 100$ and intriscia value = $120

margin of safety =120-100=20

margin of safety ratio

it ias financial ration that meassure the amount of sales that exced the break even point.in other words ,this is the revenue earned after the compmay pays all of fixed costs and varialbe costs associated the production of goods and services

=(Budgeted sales - breakeven sales revenue )/budeted sales

budegte ssales -60,000

breakven sals =36,000

mos =(60,000-36000)/60,000

40%

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ekkarill92 answered 1 year ago
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