Margin of Safety

Definition

The amount by which actual sales exceed break-even sales. It's your cushion—how much sales can drop before you start losing money. Formula: Actual Sales − Break-Even Sales.

Related Terms

Break-Even Point

The sales level where total revenue exactly equals total costs—meaning you're not making or losing money. Formula: Fixed Costs ÷ Contribution Margin per Unit. It's the minimum you must sell to keep the lights on.

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