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What Is the Purpose of Financial Ratio Analysis

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What is the purpose of financial ratio analysis?


Definitions:

Price Leadership

A situation where one dominant company in an industry sets the price of goods or services, which other companies then follow.

Marginal Cost

The increase in total cost that arises from an additional unit of production.

Average Total Cost

Average total cost is the total cost of production divided by the number of units produced, indicating the cost per unit.

Price War

Successive, competitive, and continued decreases in the prices charged by firms in an oligopolistic industry. At each stage of the price war, one firm lowers its price below its rivals’ price, hoping to increase its sales and revenues at its rivals’ expense. The war ends when the price decreases cease.

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