Lawsuit Ratio

Similar to common Accounting Ratios used in Financial Analysis, the Lawsuit Ratio allows for a sufficient evaluation of a decision based on legal risk related to gains. It can be evaluated in a qualitative or quantitative way, and is calculated by using the formula:

Lawsuit Ratio (LR) = Chances of Lawsuit / Potential Gains

-or-

Lawsuit Ratio (LR) = Current or future lawsuit projected Net Loss based on x decision / Current Revenue of x (or projected)

As LR approaches ZERO, the scenario becomes more favorable.

a. Because Jeff Bezos is an aggressive egg head and uses data for bad things, he had to settle out of court with William Sonoma.

Lawsuit ratio of Jeff Bezos selling identical products to William Sonoma = $25M Settlement / 1% of yearly revenue from those products

Astronomical Lawsuit Ratio!

b. If Bezos made a rocket to space that had ZERO negative effects on environment / ethics / or public opinion AND it was guaranteed that the net revenue per year of operation would be +$120B, then Lawsuit Ratio would be great :).

Lawsuit Ratio = Zero chance of lawsuit / $120B earnings

LR = 0 :)