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Definition of 'Price-To-Research Ratio'
A measure of the relationship between a company's market capitalization and research and development (R&D) expenses.
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Investopedia explains 'Price-To-Research Ratio'
The price-to-research ratio is of greatest importance in research based businesses, such as pharmaceutical companies. It is generally recognized that, in an industry heavily dependent on R&D, a price-to-research ratio is an important indication of a company's ability to generate future profits. However, even if this indication looks favorable, it cannot guarantee the success of future product innovations. A large amount of spending on R&D does not necessarily mean future profits are definite.
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