Two companies with identical levels of sales and profits can be expected to have the same margin of safety percentage.

Question

Quizplus · Accepted Answer

The margin of safety percentage represents the amount by which sales can decrease before a company incurs a loss. Two companies with identical levels of sales and profits can still have different levels of fixed costs and variable costs, which would impact their margin of safety percentages. Therefore, it is not safe to assume that they have the same margin of safety percentage.

Two Companies with Identical Levels of Sales and Profits Can