All other things equal, the margin of safety in a company with high fixed costs and low variable costs will tend to be higher than the margin of safety in a similar company that has low fixed costs and high variable costs.

Question

Quizplus · Accepted Answer

A company with high fixed costs and low variable costs will have a lower margin of safety because it needs to generate more sales to cover its higher fixed costs, compared to a company with low fixed costs and high variable costs.

All Other Things Equal, the Margin of Safety in a Company