calculating the margin of safety (mos) measure will help a firm answer which of the following questions? a) will we break even? b) are we using our debt wisely? c) how much will profits change if sales change? d) how much profit will we earn? e) how much revenue can we lose before we drop below the breakeven point?

According to the investing principle known as the "margin of safety," a stock should only be bought when its market price is significantly lower than its intrinsic value.
In other words, the margin of safety is the difference between the market price and your estimate of a security's intrinsic value.
The gap between expected profitability and the break-even point is the margin of safety. Current sales less the breakeven point, divided by Current Sales, is the margin of safety formula.
With a higher margin of safety, the business is better protected from a drop in sales. It serves as a cushion to protect the company from the negative effects of erratic sales periods.

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tutorconsortium127 tutorconsortium127 · Answer 2 · 2022-11-08T05:54:56+01:00

Margin of safety is how much revenue can we lose before we drop below the breakeven point.

What is meant by margin of safety?

The "margin of safety" investment tenet states that a stock should only be purchased when its market price is much less than its true worth.

The gap between the market price and your estimation of a security's intrinsic value is, in other words, the margin of safety.

The margin of safety is the distance between anticipated profitability and break-even point. The margin of safety formula is current sales divided by current sales less the breakeven point.

A bigger margin of safety provides the company with more protection against a decline in sales. It acts as a buffer to shield the business from the damaging consequences of irregular sales cycles.

Therefore, the correct answer is option e) how much revenue can we lose before we drop below the breakeven point?

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