margin of safety

margin of safety definition - business

margin of safety

  1. The difference between the market value of a firm's assets and the face value of debt using the assets as collateral. A large margin of safety enhances the credit quality of the debt.
  2. The amount by which a firm's revenues exceed breakeven. A large margin of safety means a firm could encounter a substantial reduction in sales and still remain viable.
  3. The amount by which a stock sells below its intrinsic value.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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