Question

In December 2015, General Electric (GE) had a book value of equity of $97.1 billion, 9.2 billion shares outstanding, and a market price of $30.06 per share. GE also had cash of $103.9 billion, and total debt of $201.7 billion. a. What was GE's market capitalization? What was GE's market-to-book ratio? b. What was GE's book debt-equity ratio? What was GE's market debt-equity ratio? c. What was GE's enterprise value? a. What was GE's market capitalization? GE's market capitalization was $ billion (Round to one decimal place.) What was GE's market-to-book ratio? GE's market-to-book ratio was . (Round to two decimal places.) b. What was GE's book debt-equity ratio? GE's book debt-equity ratio was (Round to two decimal places.) What was GE's market debt-equity ratio?

Answer 1

a.       The market capitalization is computed as shown below:

= 9.2 billion shares x market price per share

= 9.2 billion shares x $ 30.05

= $ 276.46 billion

Market to book ratio is computed as follows:

= $ 276.46 billion / $ 97.1 billion

= 2.85 Approximately

b.      Book debt equity ratio will be as follows:

= $ 201.7 billion / $ 97.1 billion

= 2.08 Approximately

Market debt equity ratio will be as follows:

=$ 201.7 billion / $ 276.46 billion

= 0.73 Approximately

c.       Enterprise value is computed as follows:

= Market capitalization + Total debt – cash

= $ 276.46 billion + $ 201.7 billion - $ 103.9 billion

= $ 374.26 billion

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