What is the Safety Margin?

Filed Under (Accountancy Term of the Day) by moirapottow on 15-03-2009

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The Safety Margin shows the amount of sales that can be lost before the business begins trading below the Breakeven Point and therefore at a loss. See the safety margin as a safety net.

 How is Safety Margin Calculated?
The formula to calculate Safety Margin is:

Safety Margin    =              (Actual Sales – Breakeven Sales) X 100
                                               Actual Sales