Concentration Ratio Calculator

Formula

The formula to calculate the Concentration Ratio is:

\[ 4CR = MS1 + MS2 + MS3 + MS4 \]

Where:

\( 4CR \) is the Concentration Ratio of the top four firms (%)
\( MS1 \) is the Market Share of Firm 1 (%)
\( MS2 \) is the Market Share of Firm 2 (%)
\( MS3 \) is the Market Share of Firm 3 (%)
\( MS4 \) is the Market Share of Firm 4 (%)

What is Concentration Ratio?

In finance, a concentration ratio is a measure of the total market share that is owned by the top four firms in a sector or industry. It is used to understand and analyze the total competition in an industry. For example, if the top 4 firms hold 90% of the industry in terms of sales, then there is very little competition in the industry. If the top 4 firms hold 10%, there is a lot of competition.

Example Calculation

Let's assume the following market shares:

Market Share of Firm 1 (MS1): 25%
Market Share of Firm 2 (MS2): 20%
Market Share of Firm 3 (MS3): 15%
Market Share of Firm 4 (MS4): 10%

Using the formula to calculate the concentration ratio:

\[ 4CR = 25 + 20 + 15 + 10 = 70 \% \]

The concentration ratio is 70%.