Definition of Margin of Safety Ratio

Definition of Margin of Safety Ratio

Definition: What is the Margin of Safety Ratio?

The margin of Safety is the financial ratio that measures the number of sales that exceed the break-even point. In other words Margin of safety is the remaining revenue of the company after the payment of fixed and variable costs associated with goods production and services.

Definition of Margin of Safety Ratio

If the result of the Margin of safety ratio is positive it means that the company’s operations are profitable. If the safety margin is zero then the company’s operations are in the no profit no loss situation which is not good for the company. If safety margin is negative then the company’s operations are in loss.

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