Margin Safety Calculation
Margin Of Safety between an Investments intrinsic value and its Market value. Investors try to buy assets at price lower than intrinsic value. Margin of Safety dollars , Ratio , Percentage (%), and Units included to current or estimated sales and break even sales.Margin Of Safety Calculators equal to Current (estimated) sales less than Break even point.
Margin of Safety in dollars = Current (estimated)sales-Break even Point
Let us considers,
Current (estimated)Sales is the break even point from the current or estimated sales.
Break even point as a ratio or percentage or as sales in monetary terms or units still break even.
1.)Margin Of Safety (Ratio)
The Margin of Safety (ratio) equal to Current Estimated sales than Break even Point divided to current estimated.
Margin of Safety (Ratio)=Current Estimated sales – Break even point /Current Estimated
Example for ,
Current Estimated Sales (70,000),Break Even point (40000), Current Estimated (70000)
Margin Of Safety (ratio)=70,000-40000/70,000
The answer is Margin Of Safety Ratio- 0.42
2)Margin Safety Dollars
The Margin Safety Dollars equal to Current estimated sales less than break even point.
Margin Safety Dollars= Current Estimated Sales-Break Even point
Let us considers,
Current Estimated Sales( 70000), Break Even Point(40000)
Margin Safety Dollars= 70000-40000
The answer is Margin Safety Dollars = 30000$
3.) Margin of Safety Percentage
The Margin Of safety Percentage (%) Equal to Current Estimated sales less than break even point divided to current estimated Sales Multiple 100 numbers value.
Margin Safety (%)=Current (estimated)Sales-Break even Point /Current Estimated Sales *100
Let us Consider,
Current Estimated Sales (70000), Break Even Point (40000),Current Estimated Sales (70000),100 number value,
The Answer is Margin Safety (%)42.85%
4.)Margin Of Safety In Units
The Margin Of Safety units Equal to Current Estimated sales less than break even point Divided sales price per units.
Margin of Safety(units)=Current Estimated sales-Break Even points /Sales price per units
Margin of Safety (units)=70000-40000/400
The answer is Margin Safety(units)=69,900
5)Current (or) Estimated Sales
The Current Or Estimated sales equal to sales volume multiple selling price per unit.
Current Or Estimated sales = Sales Volume*Selling price per unit
Let us consider,
Sales volume (400000),selling price per unit(300),cost per unit(300$)
Current or Estimated sales=40000*300
The answer is Current or estimated =1,2000,000$
6)Break even sales
The break even sales equal to sales volume multiple cost price per unit.
The formula as,
Break even sales = sales volume* Cost per unit
Break even sales=400000*300$
The answer is Break even 120,000,000$