Margin of safety
Margin of safetyThe term given by Benjamin Graham, 'the father of value investing', to the idea that if you buy shares for less than two thirds of their net asset value, you automatically have a cushion against any deterioration in the company's trading position in the future. Put another way, 'buy cheap'.Graham's view was that it is extremely difficult to accurately predict a company's future earnings. For an investment to be 'safe', therefore, he liked to see a margin between the value of its net current assets and its share price. If the share price was below the net current assets divided by the number of shares in issue, he would consider buying it.One of the problems with Graham's approach is that in bull markets it is very difficult to find companies that fulfil his criteria. A second problem is that many of the fastest growing companies in modern economies are those whose assets are intangible - for instance, the value of their intellectual property. Under the Graham rubric, these sorts of assets would be excluded.
Margin of safetyWith respect to working capital management, the difference between (1) the amount of long-term financing and (2) the sum of fixed assets and the permanent component of current assets.
Margin of safety
Profit marginProfit margin
Indicator of profitability. The ratio of earnings available to stockholders to net sales. Determined by dividing net income by revenue for the same 12-month period. Result is shown as a percentage. Also known as net profit margin.
Allows investors to buy securities by borrowing money from a broker. The margin is the difference between the market value of a stock and the loan a broker makes. Related: Security deposit (initial).
Variation marginVariation margin
Profits and losses on open futures contracts, which are revalued daily at the settlement price, which are subsequently paid to or received from the clearing house.
The difference between the cost price of a product and the selling price.In trading, the amount deposited with a broker in order to obtain credit for purchase of shares or futures. The margin is the price of a security less credit advanced by the broker.The difference between a market maker's buying and selling prices. Also known as spread.
Marginal propensityMarginal propensity
The fraction of a change in income devoted to an activity, such as consumption, importing, or saving. See propensity.
Further SuggestionsMargin security
Marginal propensity to import
marginal tax rate
Marginal rate of substitution
Marginal tax rate
Marginal propensity to consume
Marginal value product
Effective margin (EM)
Marginal revenue product
Net profit margin
Value marginal product
Marginal efficiency of capital