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Loading the player... Margin of safety is a principle of investing in which an investor only purchases securities when the market price is significantly below its intrinsic value. In other words, when market price is significantly below your estimation of the intrinsic value, the difference is the margin of safety.
Margin of safety = Actual revenue â Break even revenue Margin of safety = 560000 â 420000 = 140000 or 140000/560000 = 25% Break even revenue = Operating expenses / Gross margin % Break even revenue = 1850400 / (1-60%) = 4626000 Margin of safety % = (Actual revenue- Break even revenue )/ Actual revenue = 40% Actual revenue = Breakeven revenue / ( ...