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In most cases, high market concentration produces undesirable consequences such as reduced competition and higher prices. [2] The market concentration ratio measures the concentration of the top firms in the market, this can be through various metrics such as sales, employment numbers, active users or other relevant indicators. [1]
A financial ratio or accounting ratio states the relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting , there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization.
Market share is the percentage of the total revenue or sales in a market that a company's business makes up. For example, if there are 50,000 units sold per year in a ...
Relative market share indexes a firm's or a brand’s market share against that of its leading competitor. Market concentration, a related metric, measures the degree to which a comparatively small number of firms accounts for a large proportion of the market. These metrics are useful in comparing a firm’s or a brand’s relative position ...
Market cap is given by the formula =, where MC is the market capitalization, N is the number of common shares outstanding, and P is the market price per common share. [ 2 ] For example, if a company has 4 million common shares outstanding and the closing price per share is $20, its market capitalization is then $80 million.
The ratio / is always greater than 1 and the higher the / ratio, the more market power the firm possesses. As PED increases in magnitude, the / ratio approaches 1 and market power approaches zero. The equation is derived from the monopolist pricing rule:
A concentration ratio (CR) is the sum of the percentage market shares of (a pre-specified number of) the largest firms in an industry. An n-firm concentration ratio is a common measure of market structure and shows the combined market share of the n largest firms in the market.
The price-to-book ratio, or P/B ratio, (also PBR) is a financial ratio used to compare a company's current market value to its book value (where book value is the value of all assets minus liabilities owned by a company). The calculation can be performed in two ways, but the result should be the same.