Question

In December 2015​, General Electric​ (GE) had a book value of equity of $ 97.8 ​billion, 9.4 billion shares​ outstanding, and a market price of $ 32.04 per share. GE also had cash of $ 102.1 ​billion, and total debt of $ 198.1 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?

Answer 1

(a). GE's market capitalization & GE's market-to-book ratio

GE's market capitalization

GE's market capitalization = Number of shares x Market Price per share

= 9.40 Billion Shares x $32.04 per share

= $301.18 Billion

GE's market-to-book ratio

GE's market-to-book ratio = Market capitalization / Book Value of Equity

= $301.18 Billion / $97.80 Billion

= 3.08

(b)-GE's book debt-equity ratio & GE's market debt-equity ratio

GE's book debt-equity ratio

GE's book debt-equity ratio = Book value of Debt / Book value of Equity

= $198.10 Billion / $97.80 Billion

= 2.03

GE's market debt-equity ratio

GE's market debt-equity ratio = Book value of Debt / GE's market capitalization

= $198.10 Billion / $301.18 Billion

= 0.66

(c)-GE's enterprise value

GE's enterprise value = GE's market capitalization + Book value of Debt + Cash

= $301.18 Billion + $198.10 Billion + $102.10 Billion

= $397.18 Billion