Forbes annually provides a list of the most valuable companies in the world. The top 10 most

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Forbes annually provides a list of the most valuable companies in the world. The top 10 most valuable companies in the United States, from the 2007 Forbes 2000, follow.

Forbes annually provides a list of the most valuable companies

As an analyst for a securities broker, you are asked the following questions concerning some of the figures.
1. Microsoft has total assets of $66 billion but a stock market value of $276 billion. How can a company be worth more than its total assets?
2. Compute for each company the ratio of total assets to total market value. What factors must the market be considering in valuing these companies that are not captured on the companies€™ balance sheets?
3. The price-earnings ratio, often called the P/E ratio, is defined as market price per share divided by earnings per share. Alternatively, the P/E ratio can be computed as total market value divided by net income. Compute the P/E ratios for the preceding companies. What factors do you think influence P/Eratios?

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Intermediate Accounting

ISBN: 978-0324592375

17th Edition

Authors: James D. Stice, Earl K. Stice, Fred Skousen

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