# Margin of safety ratio

The **margin of safety ratio **is the margin of safety in dollars divided by actual (or expected) sales. The formula and computation for determining the margin of safety ratio are:

**Margin of safety in dollars ** **actual (expected) sales = margin of safety ratio**

** $250,000 ** ** $750,000 = 33%**

This means that the company’s sales could fall by 33% before it would be operating at a loss.

Category: Accounting & Auditing