Price elasticity of demand is a measure of the change in the consumption of a good with respect to the change in its price.
A product is perfectly elastic if price elasticity is infinite (if demand changes significantly even with a minimal price change).
if the price elasticity is greater than 1, the product is elastic; if less than 1, it is inelastic.
If the price elasticity of a good is 0 (no change in price results in a change in demand), the good is perfectly inelastic.
If the price elasticity is exactly 1 (a change in price leads to an equal percentage change in demand), then the elasticity is called unitary.
The presence of a substitute product affects its elasticity. If there are no good substitutes and the product is needed, demand will not change when the price rises, making it inelastic.
Accounting ratios, an important subset of financial ratios, are a group of metrics used to measure a company’s performance and profitability based on its financial statements.
The acid test, or quick ratio, compares a company’s shortest-term assets to its shortest-term liabilities to see if the company has enough cash to pay off its immediate liabilities, such as short-term debt.
Activity Ratio broadly describes any type of financial measure that helps investors and analysts evaluate how effectively a company is using its assets to generate revenue and cash.
Performance Based Management (ABM) is a means of analyzing a company’s profitability by looking at every aspect of its business to determine its strengths and weaknesses.
Benefit Cost Ratio (BCR) is a measure showing the relationship between the relative costs and benefits of a proposed project, expressed in monetary or qualitative terms.
The CAPE ratio is used to analyze the long-term financial performance of a public company, taking into account the impact of various economic cycles on the company’s profit.
Capital expenditures are payments for goods or services that are recognized or capitalized on a company’s balance sheet, rather than expensed on the income statement.