What does a higher margin of safety indicate about a company's sales?

A higher margin of safety indicates that a company has a significant buffer before losses occur, reflecting a company's ability to withstand fluctuations in sales without incurring losses. This margin represents the difference between actual or projected sales and breakeven sales. When the margin of safety is high, it suggests that the company can experience a decrease in sales by a substantial amount without falling into the loss zone. This is a favorable position as it provides greater security and indicates financial stability, making it easier for the company to navigate economic downturns or operational challenges. Consequently, the ability to cover fixed and variable costs comfortably is enhanced, reducing the risk of financial distress.