Because of the Flaws of the Concentration Ratio as a Measure

question 208

True/False

Because of the flaws of the concentration ratio as a measure of the extent of competition in an industry, some economists prefer another measure of competition, the Herfindahl-Hirschman Index.

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Definitions:

Cost of Equity

The return that investors require or expect to earn on their investment in a company's equity to compensate for the risk they undertake.

After-Tax Cost

The after-tax cost is the net cost of a transaction, investment, or other financial activity after taking into account the effect of taxes.

Debt-Equity Ratio

Measures a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.

Pre-Tax Cost

The expense or cost incurred by an entity before taxes have been deducted.