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Answer Posted / reni mathew
In simpler words, if a company 'X' has interest charges of
Rs 10 per annum, it should make Rs 50 as profit before tax
for its bonds to qualify as investment grade instruments.
The excess of profit after paying interest provides a sense
of comfort for investors. And this is called the 'margin of
safety.' This acts as a protection to investors against any
loss in the event of some future decline in net
profits.safety of margin is also called margin of safety.
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