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
Marginal costMarginal cost
The increase in cost that accompanies a unit increase in output; the partial derivative of the cost function with respect to output.
Effective margin (EM)Effective margin (EM)
Used with SAT performance measures, the amount equal to the net earned spread, or margin of income, on assets in excess of financing costs for a given interest rate and prepayment rate scenario.
Marginal tax rateMarginal tax rate
The additional tax which someone pays on each £1 increase of his or her taxable income. In the UK the tax bands for 2003-2004 tax year are:10 per cent on the first slice of earnings22 per cent on next slice40 per cent on top sliceUnder the 'progressive' tax system, once someone's earnings take him into the top tax bracket, any extra earnings will be taxed at the top rate. So someone who is in the 40 per cent bracket has a marginal tax rate of 40 per cent.
Marginal rate of transformationMarginal rate of transformation
The increase in output of one good made possible by a one-unit decrease in the output of another, given the technology and factor endowments of a country; thus the absolute value of the slope of the transformation curve.
Further SuggestionsInitial margin
Marginal revenue product
Value marginal product
Margin account (stocks)
Marginal propensity to import
Marginal tax rate
Marginal rate of substitution
OTC margin stock
Operating profit margin
Marginal efficiency of capital
Buy on margin