Posted in Finance, Accounting and Economics Terms, Total Reads: 640
Definition: Birth-Death Ratio (Business)
Birth-Death Ratio in term of business represents the amount of jobs created by new ventures i.e. births to the jobs lost due to closing down of certain companies i.e. death. The above calculations are done for a specified period of time i.e. monthly or annually.
Birth-death ratios help in understand the business and economy of a region, industry or country better. If there is an increase in the ratio, means there are opportunities for employment for the people. In case of a lower ratio, it shows that the industry is on a decline with many companies closing their business.
However, another aspect of this ratio which does not give a very clear picture is the fact that the ratio does not give accurate numbers in terms of growth of a particular industry or market. If the new jobs are declining but the previous jobs are declining faster, still it gives a positive ratio, which presents a wrong scenario.