What this answers
Cramer's V answers "how strong is the association between these two categorical variables, regardless of table size?" Unlike a chi-square test, which tells you whether an association is statistically significant, Cramer's V tells you how large that association actually is, on a bounded 0 to 1 scale that stays comparable across tables of different sizes and sample sizes.
How it is calculated
Cramer's V is derived from the chi-square statistic, divided by the sample size times the smaller of (rows minus 1) or (columns minus 1), then square-rooted. That denominator normalizes the raw chi-square value so V always falls between 0 and 1 regardless of how many rows or columns your table has, unlike chi-square itself, which grows with sample size and table dimensions in ways that make it hard to compare across different studies.
Worked example
For a table where 10 observations fall in one diagonal cell and 10 in the other, with the off-diagonal cells at zero: every row perfectly predicts its column, a textbook case of complete association, giving Cramer's V exactly equal to 1, the maximum possible value.
Assumption audit
What this result does not mean
Association in a contingency table, however large V measures it to be, does not establish that one categorical variable causes the other. A shared underlying cause, how categories were defined, or the specific sample collected can all produce a large V without any direct causal link.
Limitations
Cramer's V reports magnitude only, with no direction (it cannot be negative, since direction is not meaningful for unordered categories) and no significance test attached. With a small sample, V can be unstable and should be interpreted alongside a formal significance test.