# Profit-Volume (P/V) Ratio
The P/V Ratio (also called Contribution-to-Sales ratio) expresses contribution as a percentage of sales. It indicates the rate at which profit changes for every rupee of sales (after the break-even point is crossed).
## Formulas
All the following are equivalent:
$$\text{P/V Ratio} = \frac{\text{Contribution per unit}}{\text{Selling Price per unit}}$$
$$= \frac{\text{Total Contribution}}{\text{Total Sales}}$$
$$= \frac{\text{Sales} - \text{Variable Cost}}{\text{Sales}}$$
$$= 1 - \text{Variable Cost \%}\;\text{(of sales)}$$
It is typically expressed as a percentage.
## Uses of P/V Ratio
- Compute Break-Even Point in ₹: BEP = Fixed Cost / P/V Ratio.
- Compute Sales required for a desired profit: (Fixed Cost + Desired Profit) / P/V Ratio.
- Compare profitability of different products / divisions / segments.
- Indicates the margin available to absorb fixed cost and contribute to profit from every rupee of sale.
## How to Improve P/V Ratio
1. Increase the selling price per unit.
2. Reduce the variable cost per unit (better procurement, efficient labour, better process).
3. Change the sales mix — push products with a higher P/V ratio.