The Margin of Safety Percentage Is Equal to the Margin

question 112

True/False

The margin of safety percentage is equal to the margin of safety in dollars divided by total sales in dollars.

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Definitions:

External Financing Needed

This is the amount of money a company needs to seek from external sources to finance its operations, growth, or expansions that cannot be funded through internal cash flow alone.

Fixed Assets

Long-term tangible assets held for business use and not expected to be converted to cash in the upcoming year, such as buildings, machinery, and equipment.

Projected Sales

These are estimated sales figures based on current market trends, historical sales data, and other economic indicators, used for planning and forecasting by businesses.

Retained Earnings

Retained earnings refer to the portion of a company's profits that is kept or retained rather than paid out as dividends to shareholders, often used for investment or to pay off debts.