Concentration Ratio

AAA

DEFINITION of 'Concentration Ratio'

In economics, a ratio that indicates the relative size of firms in relation to their industry as a whole. Low concentration ratio in an industry would indicate greater competition among the firms in that industry than one with a ratio nearing 100%, which would be evident in an industry characterized by a true monopoly.

INVESTOPEDIA EXPLAINS 'Concentration Ratio'

The concentration ratio indicates whether an industry is comprised of a few large firms or many small firms. The four-firm concentration ratio, which consists of the market share (expressed as a percentage) of the four largest firms in an industry, is a commonly used concentration ratio. The Herfindahl index, another indicator of firm size, has a fair amount of correlation to the concentration ratio.

RELATED TERMS
  1. Perfect Competition

    A market structure in which the following five criteria are met: ...
  2. Economics

    A social science that studies how individuals, governments, firms ...
  3. Herfindahl-Hirschman Index - HHI

    A commonly accepted measure of market concentration. It is calculated ...
  4. Microeconomics

    The branch of economics that analyzes the market behavior of ...
  5. Oligopoly

    A situation in which a particular market is controlled by a small ...
  6. Monopoly

    A situation in which a single company or group owns all or nearly ...
Related Articles
  1. Economics Basics
    Economics

    Economics Basics

  2. Analyze Investments Quickly With Ratios
    Investing Basics

    Analyze Investments Quickly With Ratios

  3. Using The Price-To-Book Ratio To Evaluate ...
    Forex Education

    Using The Price-To-Book Ratio To Evaluate ...

  4. Henry Ford: Industry Mogul And Industrial ...
    Options & Futures

    Henry Ford: Industry Mogul And Industrial ...

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center