Cost-Volume-Profit Analysis, Uncertainty and Capital Market Equilibrium

The article examines the utility of cost-volume-profit (CVP) analysis in managerial decision making, proposing an alternative application of its methodology to measure firm risks through covariant profit analysis and market portfolio security returns. An overview of previous research concerning CVP analysis is given, outlining its focus on comparing various profit activity levels and to incorporate risk for better operation in uncertain environments. The author presents research and models to advocate capital asset pricing theory in combination with CVP for use in short-term business planning.