Question

Edelman engines has $20 billion in total assets. Its balance sheet shows $2 billion in current liabilities, $10 billion in long-term debt, and $8 billion in common equity. It has 500 million shares of common stock outstanding, and its stock price is $25 per share. What is edelman's market/book ratio? Round your answer to two decimal places.

Answer 1

Calculation of Edelman's market/book ratio:

The market/book ratio is calculated with the help of following formula:

Market/book ratio = Market price per share / Book value per share

The Book value per share can be calculated as follows;

Book value per share =Common Equity/ Shares of common stock outstanding

= 8,000,000,000 /500,000,000

= 16

Hence ,

Market/book ratio = 25/16 = 1.56

Hence, Edelman's market/book ratio is 1.56