6.99% is the margin of safety as a percent of sales.
• The vast majority of value investors often won't buy a security unless the MOS is estimated to be between 20 and 30 percent. The investor will only buy a security if the current share price is 20% less than the intrinsic value determined by their valuation the hurdle is set at 20%.
• The margin of safety will be determined as a percentage of sales as follows:
(expected sales - break even sales) /anticipated sales = ($336,000- $312,500)÷$336,000
=$23500÷$336,000
=0.0699
=6.99%
• The margin of safety demonstrates the amount that sales can decline before a company experiences a loss. Profit, regardless of break-even point, simply indicates how much loss or income was produced during the accounting
period.
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