Companies use the margin of safety (MS) and degree of operating leverage (DOL) concepts as follows:

• the MS indicates how far (in units, in sales dol¬ lars, or as a percentage) a company is operating from its break-even point; the MS percentage is equal to (1 — degree of operation leverage).

• the DOL shows the percentage change that would occur in profit given a specified percent¬ age change in sales from the current level; the DOL is equal to (1 — MS%).

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