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Margin of safety

This topic has 3 replies, 2 voices, and was last updated 6 years ago by John Moffat.

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March 25, 2018 at 6:53 pm #443745
michaelsamiotis
Participant
- Topics: 47
- Replies: 27
Good afternoon sir. I have a question which is more mathematical but it relates to margin safety. When in chapter 7 we needed to find the % change in demand we did (Q2-Q1)/Q1 and when I saw the margin of safety my mind went to (budgeted sales-breakeven)/breakeven as in change of demand but you put budgeted sales. When do we apply each? What is the difference between (Old-New)/New and (Old-New)-Old? It’s a riddle to me at this moment.
Thank you for everything.
March 25, 2018 at 6:59 pm #443749
John Moffat
Keymaster
- Topics: 57
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I am sorry, but I do not really understand what you are asking.
Chapter 7 of our lecture notes is about pricing and is nothing to do with the margin of safety.
March 25, 2018 at 7:35 pm #443752
michaelsamiotis
Participant
- Topics: 47
- Replies: 27
What am I asking is what is the difference between doing (Old-New)/New and (Old-New)-Old where New and old are the values that we are seeking their difference in percentage.
March 26, 2018 at 7:18 am #443761
John Moffat
Keymaster
- Topics: 57
- Replies: 54479
But I repeat – in Chapter 7 we are not looking at margin of safety. We are looking at the elasticity, which is not the same thing.
The formula in the lectures is what we use.
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