scroll to top
Stuck on your essay?
Get ideas from this essay and see how your work stacks up
Word Count: 633
Introduction The concept of market-to-book ratios can be defined by a study of two contrasting strategies applied to maximize profits General Electric Corporation has pursued a conservative growth strategy by focusing on being the best in each industry where it competes Tyco International has focused on an aggressive strategy through rapid multiple acquisitions Market-to-book ratios reveal if a stock is overvalued or undervalued If the ratio is greater than one then the stock is overvalued In contrast if the ratio is less than one then the stock is undervalued The degree to the value of the stock can be seen in the magnitude of the ratio By examining these ratios for each stock along with the net profit margins the success of each strategy can be measured Market-To-Book Ratio Based upon the most recent quarterly report from each General Electric GEs and Tyco International TYCOs websites including current stock prices the following information was gathered for each company Table 1 shows the data collected and calculated to lead to the market-to-book ratio for each corporation using the most current quarterly earning reports Table 1 Information Required to Calculate Market-To-Book Ratios In MMs GETYCO Total Common Stock Shares Outstanding105862019 Current Stock Price34072715 Market Capitalization360677225481585 Shareholder Equity10273034186 Market-To-Book Ratio351160 To calculate market capitalization the total common stock shares outstanding are multiplied by the current stock price To calculate market-to-book ratio divide each companys market capitalization by that companys shareholders equity For GE 10586 X 3407 61624 102730 351 For TYCO 2019 X 2715 61624 34186 160 Based on these market-to-book ratios TYCOs strategy has provided greater shareholder wealth creation This is evident by the smaller market-to-book ratio Both are greater than one so each companys stock is overvalued However GEs is more overvalued providing for less potential shareholder wealth creation TYCO has utilized more of the investment to develop more value into
@Kibin is a lifesaver for my essay right now!!
- Sandra Slivka, student @ UC Berkeley
Wow, this is the best essay help I've ever received!
- Camvu Pham, student @ U of M
If I'd known about @Kibin in college, I would have gotten much more sleep
- Jen Soust, alumni @ UCLA