The Margin of Safety Is Calculated By

question 118

Multiple Choice

The margin of safety is calculated by:

• A)Dividing fixed costs plus target income by the contribution margin.
• B)Subtracting break-even income from current income.
• C)Subtracting break-even sales from current sales.
• D)Subtracting fixed costs from current contribution margin.

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Definitions:

Yield To Maturity

The total return anticipated on a bond if it is held until it matures, including both interest payments and the gain or loss incurred if purchased at a price different from its face value.

Face Value

The nominal or dollar value printed on a security, such as a bond or stock certificate, representing the amount due to the holder at maturity, not including interest or dividends.

Callable Bonds

Bonds that can be redeemed by the issuer prior to their maturity date, often at a premium price.

Par Value

The face value of a bond or the stock value stated in the corporate charter, which is often a nominal amount.