Question

MARKET/BOOK RATIO Edelman Engines has $9 billion in total assets. Its balance sheet shows $1.35 billion in current liabilities, $4.5 billion in long-term debt, and $3.15 bllion in common equity. It has 800 million shares of common stock outstanding, and its stock price is $39 per share. What is Edelman's market/book ratio? Round your answer to two decimal places.

Answer 1

Market capitalization of common equity = Number of common shares outstanding * Market price = 800 million * $39 = $31,200 million = $31.2 billion

Market / book ratio = Market capitalization of common equity / Book value of common equity = $31.2 billion / $3.15 billion = $9.90