0Margin of Safety (MOS) is the sale level which exceeds Break Even point [BEP] i.e. it is the level at which an entity’s output/sales level can fall before a business reaches its breakeven point.
It is useful to determine financial soundness of business enterprise. If margin of safety is high, then the financial position of the enterprise is sound.
| MOS in terms of | Formula |
| 1. Rupees | Profit/PV Ratio |
| 2. Units | Profit/Contribution per unit |
| 3. % | MOS Sales/Actual Sales (or) Profit/Contribution |
Note: If total capacity = actual capacity, then “MOS = 1 – Break Even Point (BEP).”
