Cisco's Price to Book Ratio
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Annual Report Project Company Selections and P/B Ratios
What company have you chosen for the Annual Report Project?
What in particular interests you about this given company?
Locate your public company's Form 10-K. You will find the most recent report in the "Investor" or "Investor Relations" section of the company's website. Alternatively, you can use Yahoo Finance or sec.gov/edgar. Within the 10-K, find the information needed for the formulas below to calculate your company's Price-to-Book Ratio.
Price to Book Ratio = Current Share Price
Book Value per Share
Book value per share can be calculated using the following formula:
Book Value per Share = Total Shareholders' Equity
Total Number of Share Outstanding
Share your company's P/B Ratio on the Discussion Forum showing your calculations. List your company's: Name, Trading Call Letters or Trading Symbol (i. e. Nasdaq) and P/B Ratio. Is your company's stock undervalued or overvalued (according to the definition of its industry)? Based on this information, would you promote your company's stock to interested Investors? Why or why not?
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Solution Summary
This solution illustrates how to compute book value per share, how to find a company's price per share, and how to use thee measures to find its price-to-book value ratio. It also explains how a company is over- or undervalued using the ratio and other factors to consider.
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The company I have chosen is Cisco Systems, Inc. (Cisco). The company's ticker symbol is CSCO and it trades on the NASDAQ Exchange. I am interested in this company because it sells a wide-range of information technology-related products, is known for having state-of-the-art security in all of its products, and has high customer satisfaction ratings (Team Nuggets, 2017). I am interested to see how those factors have impacted its finances.
The company's year ends on the last Saturday of July, so its latest year ended on July 27, 2019. On that date, its total shareholder' equity was $33,571,000,000. It had 4,250,000 common shares outstanding with no other classes of shares outstanding (Cisco Systems, Inc., 2019). Therefore, its book value per share was $33,571,000,000 / 4,250,000, or $7.90 per share. Its stock price closed at $56.93 per share on July 26, 2019, the preceding day (which was a Friday) (Cisco Systems, Inc. (CSCO), 2019). Its ...
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