## What does a profit volume graph show?

## What does a profit volume graph show?

A profit-volume (PV) chart is a graphic that shows the earnings (or losses) of a company in relation to its volume of sales. The profit-volume chart gives a company a visual of how much product must be sold to achieve profitability.

### What is the significance of profit volume ratio?

A high P/V ratio indicates high profitability so that a slight increase in volume, without increase in fixed cost, would result in high profits. A low P/V ratio, on the other hand, is a sign of low profitability so that efforts should be made to improve P/V ratio.

#### What is a profit graph?

A risk graph (or profit graph) is a two-dimensional graphical representation that displays the range of profit or loss possibilities for an options trade. The horizontal axis of a risk graph shows the price of an underlying security at its expiration date, while the vertical axis shows potential profit or loss.

**What is gradient in profit volume chart?**

The intercept on the vertical axis shows the level of fixed costs, and where the line crosses the horizontal axis represents the breakeven point – ie where profit is zero. The gradient of the line represents the contribution per unit.

**What is the relation established by profit volume ratio?**

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 of changes in the volume. In the above example, for every Rs. 100 sales, a Contribution of Rs.

## How do you find profit volume?

The Profit Volume Ratio can be calculated as follows:

- PV Ratio = (Contribution/ Sales) x 100.
- PV Ratio = (Changes in Profit/ Changes in Sales) x 100.
- PV Ratio = 100 – Variable Cost Ratio.

### How do you read a profit graph?

strategy. Anything on the Y axis above the X axis represents a gain. Anything on the Y axis below the X axis represents a loss. The X axis represents the price of the underlying (stock, index or whatever other investment we are analyzing).

#### How do you interpret break even analysis?

Interpretation of Break Even Analysis

- Profit when Revenue > Total Variable Cost + Total Fixed Cost.
- Break-even point when Revenue = Total Variable Cost + Total Fixed Cost.
- Loss when Revenue < Total Variable Cost + Total Fixed Cost.