Question

P/V ratio shows the ________ ratio.
A Profit and volume B Profit earning capability C Safety margin D None of the above

Answer 1

Correct option is A)
P/V ratio = Contribution/ Sales. It is used to measure the profitability of the company. Contribution is the excess of sales over variable cost. So basically P/V ratio is used to measure the level of contribution made at different volumes of sales.