How to find margin of safety percentage?
Understand the Problem
The question is asking how to calculate the margin of safety percentage, which involves understanding the concept of margin of safety in financial analysis.
Answer
[(Actual Sales - Break-Even Sales) / Actual Sales] x 100
The final answer is: [(Actual Sales - Break-Even Sales) / Actual Sales] x 100
Answer for screen readers
The final answer is: [(Actual Sales - Break-Even Sales) / Actual Sales] x 100
More Information
The margin of safety is an important concept in management accounting and financial analysis, indicating how much sales can drop before the business reaches its break-even point.
Tips
A common mistake is not converting the final fraction to a percentage by multiplying by 100.
Sources
- What is the Margin of Safety Formula? - corporatefinanceinstitute.com
- How to Calculate Margin of Safety - GoCardless - gocardless.com
- How To Use the Margin of Safety Formula (With Example) - Indeed - indeed.com
Thank you for voting!
