Margin of Safety
Short definition
Margin of safety is how far actual (or budget) volume sits above break-even. It shows how much sales can fall before profit hits zero; read it with DOL.
Detailed explanation
The percentage form compares better than absolute units. Cash margin of safety is built off cash break-even and compared with loan tenor.
A mix shift moves break-even; a margin versus the old break-even misleads. Growth capex inflates fixed cost and narrows the margin before volume arrives.
Why it matters for the CFO
Management can see a sales record while the margin of safety has tightened: fixed cost comes first, sales later.
How it is calculated
Güvenlik marjı = (Fiili − Başabaş) / Fiili
Numerator is volume above break-even; denominator is actual (or budget) volume. The cash version uses cash break-even.
Variables in the formula
- MoS: margin of safety (units, sales or %)
How to read it
A thin margin means a small shock is a loss. There is no universal “enough”; contract length, inventory and price flexibility set it.
Numerical example
Actual sales 50 mn TL, break-even 40 mn TL → margin of safety = 10/50 = 20%. A 20% sales drop hits P&L break-even.
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Definitions are educational. They are not investment, credit or tax advice.