Question

The following financial data of two firms in the same industry are obtained from Yahoo Finance Statistics as of October 2019.

	Firm A	Firm B	S& P 500
Market price per share	120	298
Market Cap	342B	131B
Enterprise value	415B	129B
P/E (trailing)	27.2	36.0	22.1 (S&P 500)
EPS	4.42	8.26
EV/Revenue	0.80	0.85
EV/EBITDA	12.76	20.70
Profit margin	2.48%	2.4%
Operating margin	4.20%	3.1%
Total cash	9.28B	9.44B
Long-term debt	44.4B	5.1B
Beta	0.65	0.93
Short % of Float	1.29%	1.15%
Stock price change in last 1 year	28.2%	32.6%	8% (S&P 500)
Dividend yield (trailing)	1.76%	0.82%	1.93% (S&P 500)
Payout ratio	47.5%	29.5%

1. (1) Briefly explain/define

   1. Market cap

   2. P/E ratio

   3. Profit margin

   4. Beta

   5. EBITDA

   6. Dividend yield

   7. Payout ratio

2. Based on the data only how would you compare these two companies financially?

Answer 1

Market Capitalisation is value of the company in the market or economy.It is calculated by multiplying the outstanding shares of the company with the current market price of the shares of the company.Market capitalisation of firm A is more than firm B which means firm A value of its equity is more than firm B.

PE Ratio measures the price of the share of the company in comparison to its earning per share.It represents the number of times the company shares is trading in comparison to its earning per share.Higher PE ratio indicates higher earnings expectation by investors.Firm B PE ratio is more which means it's investors expect more earnings in future or either the firm is overvalued that's why it's PE is more.

Profit margin is the ratio of profit of the company to its revenue.It shows how well company is managing it's fianances.Firm's A profit margin is more in comparison to Firm's B which means firm A is operating and managing well it's finances.

Beta is the level of risk in relation to the market the markets exposure.Firm's A beta is less in comparison to Firm's B which means firm A is less riskier in comparison to other in relation to market movements.

Only 4 can be answered at once.Please ask remaining sub parts seperately.