Danny owns two companies where he has recently made changes. The margin of safety ratio for Company X is 42% and the margin of safety ratio for Company Y is 25%. What does this imply about the two companies?

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12-08-2020
Business

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Danny owns two companies where he has recently made changes. The margin of safety ratio for Company X is 42% and the margin of safety ratio for Company Y is 25%. What does this imply about the two companies?

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topeadeniran2 topeadeniran2 · Answer 1 · 2020-08-17T04:09:50+02:00

Answer: Company X could lose more business before it will begin experiencing financial difficulties when it is being compared to company Y

Explanation:

Margin of safety ratio simply helps to understand the extent to which there'll be drop in sales before a company will begins to make a loss.

Since the margin of safety ratio for Company X is 42% and the margin of safety ratio for Company Y is 25%, it means that Company X could lose more business before it begins experiencing financial difficulties when it is compared to company Y.