Concept explainers
Financial analysts engage in business valuation to determine a company’s value. A standard approach uses the multiple of earnings method. You multiply a company’s profits by a certain value (average of
COMPANY-Drug company name
TS-Ticker symbol
SIC3-Standard industrial Classification 3 codes (industry group identifier)
SIC4-Standard industrial Classification 4 codes (industry identifier)
PB fye-Price-to-book value ratio (fiscal year ending)
PB fye-price-to-earning ratio (fiscal year ending)
NL Assets-Natural log pf assets (as a measure of size)
ROE-Return on equity
SGROWTH-Growth (GS5)
DEBT/EBITDA-Ratio of debt to earnings before interest, taxes depreciation, and amortization
D2834-Dummy variable indicator of SIC 4 code 2534 (1 if 2834, 0 if not)
D2835-Dummy variable indicator of SIC 4 code 2835 (1 if 2835,0 if not)
Develop the most appropriate multiple regression model to predict the price-to-book value ratio. Perform a through residual analysis and provide a detailed explanation of your results.
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