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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937
Textbook Problem
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MARKET/BOOK RATIO Edelman Engines has $17 billion in total assets. Its balance sheet shows $1.7 billion in current liabilities, $10.2 billion in long-term debt, and $5.1 billion in common equity. It has 300 million shares of common stock outstanding, and its stock price is $20 per share. What is Edelman’s market/book ratio?

Summary Introduction

To determine: E Company’s market/book ratio.

Introduction:

Market/Book Ratio:

It represents the relationship between market price per share and the book value per share. More is the market/book ratio better is the firm’s condition.

Explanation

Given,

Stock price is $20 per share.

Formula to calculate market/book ratio,

Market/Bookratio=MarketpriceperShareBookvalueperShare

Substitute $20 for market price per share and $17 for book value per share (working note) in the above formula,

Market/Bookratio=$20$17=1.176×

Here, market/book ratio is 1.176×

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