The Profit Volume (P/V) Ratio is the measurement of the rate of change of profit due to a change in volume of sales. It is one of the important ratios for computing profitability as it indicates contribution earned with respect to sales.
P/V ratio establishes the relationship between contribution and sales. It is importance for analysis the profitability of operations of a business. It reveals the effect on profit of changes in the volume.
P/V Ratio also use for Calculate the BEP (Break Even Point) of the Business
Formula of P/V Ratio
P/V Ratio = Contribution/Sale x 100
Contribution = Sales – Variable Cost
Example of P/V Ratio
