Margin of Safety
How many extra sales you have above break-even — your cushion against disaster.
Formula
Margin of Safety = Actual Sales − Break-even Sales
Real World
Ryanair's ultra-low cost base means it breaks even at a relatively low load factor, giving it a wide margin of safety — even if bookings fall sharply, it can remain profitable where rivals cannot.
Exam Focus
Always express margin of safety as both units and a percentage of actual sales to access full marks in calculation questions.
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