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Challenges in Measuring and Reporting R&D Costs
This approach can result in a more stable earnings profile, which may appeal to investors. In an environment with constant change, it’s integral for a company to remain on the bleeding edge of innovation. Companies such as Facebook, for example, are investing heavily in the research development of such products as virtual reality and predictive chat bots. These endeavors allow Facebook to diversify its business and find new areas of opportunistic growth as technology continues to evolve. On the other hand, a low R&D Expense Ratio may indicate that a company is not investing enough in innovation and may struggle to keep up with competitors in the long run. Finally, a company’s overall financial health can also impact its R&D Expense Ratio.
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