What is a '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.
BREAKING DOWN '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.