Margin of safety - example
This is usually expressed as a quantity, and you should always do this. However, it is better, as well, to put the margin of safety in context by expressing it as a percentage of the break-even quantity. Numbers alone can be misleading.
Example - margin of safety
Two competing companies in the MP3 market have the following break-even information about their production facilities and levels
|Margin of safety (units)||250||200|
The larger margin of safety in absolute terms represents a smaller relative quantity. 3tec will go into a loss position faster than Zensa.