We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

In Finance, what is Power Ratio?

By Toni Henthorn
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

A power ratio is a business ratio used by media companies, such as television or radio stations, to benchmark company performance in terms of revenue. The greater a company’s power ratio is, the greater is that company’s ability to generate revenue relative to its market percentage of audience members. Company executives use power ratios to track and report trends in sales, to compare company operation with other companies in the same venue, and to appraise the company for a potential buyout. In order to calculate a power ratio, the company must first determine its audience share, the percentage of viewers, listeners, or users who tune in or who use that company’s services. Once the audience share is known, executives compare the company income to the total market revenue to determine whether the company is generating the expected amount of income, given its share of the audience.

When a company obtains a power ratio of 1.0, the company is producing the amount of income that one would expect for its share of the audience. A power ratio above 1.0 signifies that the company is producing income at a level that exceeds expectations. For example, a company with a power ratio of 1.5 is generating 50 percent more income than expected based on its market share. Power ratios below 1.0 signal lagging sales and lackluster income potential.

Media companies calculate a power ratio by dividing the company revenue by the product of the audience share and the overall market revenue. For example, WLST radio station determines that it attracts 30 percent of the listeners of rock music. The revenue for WLST in the last quarter was $400,000 US Dollars (USD), with the total market revenue for the rock venue at $1 Million USD. In accordance with the power ratio method, the company multiplies the audience share by the market revenue, yielding a value of $300 Thousand USD. Dividing the $400,000 USD in company revenue by the $300,000 USD yields a power ratio of 1.33.

Marketing research firms generate power ratio and market share reports for entire formats across the industry. These reports indicate the relative strength of individual market segments. Research companies can calculate audience share through surveys, diaries, and polls. The companies also collect data electronically and through software programs. One company that monitors television audiences globally is AGB Nielsen Media Research, which uses a microphone to pick up barely audible, embedded tones in broadcasts to track television viewing.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Discussion Comments

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.