Profit and Shareholder Wealth Comparison

Profit and Shareholder Wealth Comparison To differentiate two competing companies in a certain industry many financial ratios arsehole be used in order to determine which comport is a better buy or if the company organism looked at is performing better than the peers. This paper pass on compare GE and Tyco to determine which one has been performing at a higher level than the other. To value these companies certain data essential first be provided, the first one is common stockholders equity. For GE the total is $112,314,000 and for Tyco the total is $15,624,000. Next the trade capitalisation for separately firm will be provided. Since Tyco has 49,284,000 shares outstanding and a market price 34.07, as of 1/18/2008, the market capitalization is 16.86 zillion. GE has a price of 34.31 with 10.11 billion shares outstanding 346.87 billion in market capitalization. When determining a value for a company a market-to-book ratio is used. This ratio is calculated by dividing the companys market capitalization by that companys shareholders equity. In the case of GE the ratio would be 3088 found by (346,870,000,000 / 112,314,000). For Tyco the ratio would be 1079, (16,860,000,000/ 112,314,000.) This shows that GE has generated more shareholder wealth than Tyco for that stoppage.

Another piece of information that will be involve is the profit margin, this can be found by dividing realise income by total sales revenue. This information can be found on the statement of cash flows and for this paper the weather five years from 2002-2006 will be examined. Starting with 2006 GE had 12.74% (20,829 / 163,391), then 11.12% (16,711/ 150,242), 11% (16,819 / 152,866), 11.31% (15,236 / 134,641), and 10.71% (14,167 / 132,226) of profit margins. Tyco had profit margins for the same period of 20.71% (3,590/ 17,336, 18.57% (3,094/ 16,665), 7.17%(2,879 / 40,153), 2.73% (980 / 35,897), and -26.36% (-9,180 / 34,824.) To find the average net profit margin they will all be added and divided by five which... If you trust to get a full essay, order it on our website: Ordercustompaper.com

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