The contribution margin ratio is a financial metric that represents the percentage of sales revenue that exceeds total variable costs, effectively showing how much revenue contributes to fixed costs and profits. This ratio helps businesses assess their profitability and make informed decisions about pricing, cost control, and sales strategies. By understanding the contribution margin ratio, companies can better evaluate how changes in sales volume will impact overall profitability.
congrats on reading the definition of contribution margin ratio. now let's actually learn it.