When the contribution from sales is expressed as a sales value percentage, then it is known as profit/volume ratio (or P/V ratio). The relationship between the contribution & sales is expressed by it. Sound ‘financial health’ of a company’s product is indicated by better P/V ratio. **Improvement of P/V Ratio:** By the following ways, an improvement in this ratio can be achieved by: The selling price increase; but the risk that the volume of sales might be affected in involved in it. By purchasing the latest machinery, a reduction in the variable cost per unit can be achieved, thereby cutting the hours which may be required to complete each operation. However, higher fixed costs such as depreciation & insurance might offset this reduction. By concentrating on those products by which highest contribution can be achieved. For doing business analysis, in the hands of management, the P/V ratio is an invaluable tool.

Dear Friend > Improvement of PV Ratio PV Ratio can be improved by the following means -- By reducing the variable cost, -- By increasing the selling price, or -- By increasing the share of products with higher PV Ratio in the overall sales mix. Thanks