Problem: With declining demand and sales, the last several years have been challenging in the global auto industry. You are interested in better understanding the performance and valuation of major global companies in the industry. The following table presents net income for the year and shareholders€™ equity and market value at the end of each fiscal year for four global auto companies.

Required
a. Comment on changes in net income and book values of each year.
b. Compute the price- earnings (P/E) ratios and price- to- book (P/ B) ratios for each year.
c. Compute an average of price- earnings (P/E) ratios and price- to- book (P/B) ratios for each year.
d. Comment on the companies€™ P/ E ratios over time. Are there any unusually high or low P/ E ratios? If so, why? Comment on the average over time.
e. Why would the P/ B ratios in the automotive industry generally be higher than one? Are there any unusually high or low P/ B ratios? If so, why? Comment on the company€™s P/ B ratio over time. Comment on the average over time.
f. Compare the average P/ E and P/ B ratios for the pharmaceutical companies from Example 15.23 in the text to those in the auto industry.

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Fiscal Year Measure Compamy (U.S. dollars in millions) 2011 2012 2013 Net Income Book Value of Common Stockholders Equity Market Value of Common Stock Net Income Book Value of Common Stockholders Equity Market Value of Common Stock Net Income Book Value of Common Stockholders Equity Market Value of Common Stock Net Income Book Value of Common Stockholders Equity Market Value of Common Stock $20,213 5,665 7,148 Ford Motor Company- U.S. 15,028 40,896 9,190 27,729 15,947 26,382 50,793 59.769 6,188 5,346 29 25,853 42,607 General Motors Company - U.S. 31,717 2,566 53,423 56,767 3,899 2,009 53,499 41.726 39,393 Honda Motors Company-Japan 54,951 7352 51,404 66,336 74,513 8,037 12,004 57859 58,753 Daimler AG- Germany 46,768 58,685 92,626