![]() ![]() It is expressed in the following ways:ĭesired sales, variable cost and contribution can be found out with the help of P/V ratio. ![]() The profit/volume ratio is expressed in percentage. A higher P/V ratio is an indicator of sound financial health of the company's product. Higher the P/V ratio higher the profit and lower the P/V ratio lower is the profit. Profitability of the product can be ascertained by comparing the P/V ratios for the different products. Any increase in contribution leads to increase in profit because fixed cost is assumed to be constant for all the levels of production. Profit/volume ratio establishes the relationship between contribution and sales. The profitability of the operation of a business can be known with the help of profit/volume ratio. ![]()
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