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# Pv ratio

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### Pv ratio

1. 1. p/v ratio <br />Submitted to<br />L.Rongmai<br />Asst prof<br />Dba-Sms<br />Submitted by <br />Sujoykumarpaul<br />Roll no -03<br />1<br />
2. 2. The profit /volume ratio ,which is also called the contribution ratio or marginal ratio express the relation of contribution to sales and can be expressed as under<br />P/v ratio =𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛𝑠𝑎𝑙𝑒𝑠<br /> <br />March 3, 2011<br />2<br />
3. 3. Since<br />Contribution = Sales – variable cost = variable + Profit,<br />P/V ratio can also be expressed as:<br />P/V Ratio=𝑺𝒂𝒍𝒆𝒔 −𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝒄𝒐𝒔𝒕𝑺𝒂𝒍𝒆𝒔<br /> <br />March 3, 2011<br />3<br />
4. 4. The P/v Ratio ,which establishes the relationship between contribution and sales is of vital importance for studying the profitability of operations of a business .It reveals the effect on profit in the volume .<br />Higher the P/V Ratio, more will be the profit and lower the P/V Ratio lesser will be the profit.<br />March 3, 2011<br />4<br />
5. 5. The ratio can be increased by increasing the contribution …..<br />Increasing the selling price <br />Reducing the variable or marginal cost<br />Changing the sales mixture and selling more profitable products for which the P/V Ratio is higher.<br />March 3, 2011<br />5<br />
6. 6. The concept of P/V Ratio is also useful to calculate the break even point , the profit at a given volume of sales ,the sales volume required to earn a given profit and the volume of sales required to maintain the present profits if the selling price is reduced by a specific percentage.<br />March 3, 2011<br />6<br />
7. 7. Thank you<br />March 3, 2011<br />7<br />