Surya Ltd. has earned contribution of Rs. 2,00,000 and net profit of Rs. 1,50,000 on sales of Rs. 8,00,000. Calculate the Margin of Safety and PV ratio.
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Explanation:
PV Ratio = Contribution/ Sales × 100
= 2,00,000/8,00,000 ×100
PV Ratio = 25%
Margin of Safety = Profit / PV Ratio
= 1,50,000 / 25%
= 1,50,000 / (25/100)
= 1,50,000 / 0.25
= 6,00,000
Margin of Safety = 6,00,000
Therefore, PV Ratio = 25% and Margin of Safety = 6,00,000
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