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 gives it a large margin of safety — it can remain profitable even when load factors (seat occupancy) drop well below competitors' break-even levels.
Exam Focus
State margin of safety in both units and as a percentage of actual sales; the percentage form is needed for comparative analysis questions.
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