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How do you calculate Competitive Advantage?
Competitive Advantage is hard to measure since it is a qualitative value. What is Jitta approach on calculating this value? Even though we can’t directly disclose our calculation formula, we can briefly explain that Competitive Advantage calculation is the most complex in all 5 Jitta Factors, and almost as complex as Jitta Score. We calculate it by using many financial data and all the three main financial statements.
The Competitive Advantage calculating method is an analysis of every financial data involved in business management: how much income and profit grow and whether it is higher or lower compared to its industry, if both income and profit grow at the same rate, which company has better cash flow, and which company has better cost control and economy of scale. If all other factors are equal, which company incurs less debt to make equal profit, and which company invests less to make equal profit. That company will certainly have better Competitive Advantage.
The above is a simple and easy to understand example. In reality, many more financial data is required and the calculating logic is a little more complex.