Question

The margin of safety ratio is computed as actual sales divided by break-even sales. is used to determine the break-even point. indicates what percent decline in sales could be sustained before the company would operate at a loss. measures the ratio of fixed costs to variable costs.

Answer 1

indicates what percent decline in sales could be sustained before the company would operate at a loss.

Step-by-step explanation:

Since, Margin of safety ratio = Expected Sales - Break even sales

therefore,

The correct statement is : The margin of safety ratio indicates what percent decline in sales could be sustained before the company would operate at a loss.