Profit-Volume (PV) Chart

AAA

DEFINITION of 'Profit-Volume (PV) Chart'

A graphic that shows the relationship between a company's earnings (or losses) and its sales. The chart tells how different levels of sales affect a company's profits. Companies can use profit-volume charts to establish sales goals, to analyze whether a potential project is likely to be profitable and to see the maximum potential profit or loss of a given project, as well as where the breakeven point lies.


Companies use PV charts in cost-volume-profit analysis along with breakeven charts and contribution charts.

INVESTOPEDIA EXPLAINS 'Profit-Volume (PV) Chart'

A company with significant fixed costs depends heavily on sales volume to achieve its profit goals. Hotels, for example, have a fixed number of rooms, and for each room they have purchased furniture, bedding, window treatments, air conditioning units, lighting, televisions and so on. The hotel also has to maintain its common areas regardless of the number of visitors it has on a given night.





So, in order to cover the costs of running the hotel restaurant, keeping the hotel pool clean, heating or cooling the hotel lobby and hallways, employing front desk staff and so on, the hotel must sell a certain number of room nights before it starts to earn a profit on a given night.

RELATED TERMS
  1. Operating Cost

    Expenses associated with administering a business on a day to ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the ...
  3. Profit

    A financial benefit that is realized when the amount of revenue ...
  4. Expense

    1. The economic costs that a business incurs through its operations ...
  5. Profitability Ratios

    A class of financial metrics that are used to assess a business's ...
  6. Profit Margin

    A ratio of profitability calculated as net income divided by ...
RELATED FAQS
  1. What is the difference between recurring and non-recurring general and administrative ...

    The difference between recurring and nonrecurring general and administrative expenses can best be understood as the difference ... Read Full Answer >>
  2. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  3. What is a negative write-off?

    A negative write-off is a write-off conducted by a company or accountant after deciding not to pay back an individual or ... Read Full Answer >>
  4. How do you record adjustments for accrued revenue?

    An accountant records adjustments for accrued revenues through debit and credit journal entries in defined accounting periods ... Read Full Answer >>
  5. What is the average return on equity for a company in the retail sector?

    The retail sector includes automotive; building supply; distributors; general; grocery and food; online; and special lines ... Read Full Answer >>
  6. What is the average price-to-earnings ratio in the retail sector?

    According to NYU's Stern School of Business, as of January 2015, using trailing 12-month data, the average price-to-earnings ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    The Financial Characteristics Of A Successful Company

    There are many factors that contribute to a profitable business. Find out what they are here.
  2. Forex Education

    The Myth Of Profit/Loss Ratios

    Determine whether your trading approach is only profitable on paper.
  3. Entrepreneurship

    How To Make $1 Million In Your Small Business

    Make your dream a reality. Find out what you can do to reach this financial goal.
  4. Fundamental Analysis

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  5. Economics

    Understanding Management by Objectives

    Management by objectives is a process in which a manager and an employee agree on specific performance goals and then develop a plan to reach those goals.
  6. Economics

    What Does Going Concern Mean?

    Going concern is a concept used in business and accounting to describe the fiscal health of a company.
  7. Fundamental Analysis

    Calculating the Capacity Utilization Rate

    Capacity utilization rate is a ratio used to compare a current usage level against a maximum potential level.
  8. Economics

    Explaining the Supply Chain

    A supply chain is the cumulative network involved in moving raw materials, components and finished products from original suppliers to end users.
  9. Credit & Loans

    Should You Use Credit Cards To Fund Your Business?

    We give you 4 reasons to consider using a credit card instead of a business loan to fund your business, and how to be smart about it.
  10. Economics

    What is Normal Profit?

    Normal profit is an economic term that means zero economic profit.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!