What is P/V (Profit Volume) Ratio? How to Calculate P/V Ratio?

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