Rakesh Sahu
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CA Sandeep Bohra
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-The Profit Volume (PV) Ratio is the ratio of Contribution over Sales. It measures the Profitability of the firm and is one of the important ratios for computing profitability. The Contribution is the extra amount of sales over variable cost.
-It may be used for the calculation of the desired volume of output, profit or other essential facts
-Comparisons can be made by calculating the P/V Ratio for each of the factors to be compared, viz.
- Line of product,
-Sales area,
-Method of sales (e.g., sales through wholesalers or retailers),
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rohit awasthi
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Dear Friend
> Uses of P/V Ratio
1. To compute the variable costs for any volume of sales.
2. To measure the efficiency or to choose a most profitable line. The overall profitability of the firm can be improved by increasing the sales/output of a product giving a higher PV ratio.
3. To determine break-even point and the level of output required to earn a desired profit.
4. To decide more profitable sales-mix.
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