Answer:
B) False
Step-by-step explanation:
Margin of safety measures the percentage difference between actual sales and break even sales.
Margin of safety acts like a buffer zone that the Company can lose before it stops making profits.
Margin of safety is calculated as follows:
Margin of Safety = (Current sales - break even sales) / Current sales
30% margin of safety indicates that the Company can bear to lose 30% of its sales before it reaches to break even level.
Net profit margin of 30% shows that every dollar of sales earns 30 cents in profit.