Please use these companies: www.ge.com & www.tyco.com.
Using each companies annual reports/financial information from moneycentral.msn.com; please help answering the following:
1. Divide each company's market capitalization by that company's shareholders' equity. This market-to-book ratio provides one measure of shareholder wealth created by each company. Include your calculations please.
2. Based on these market-to-book ratios, which company's strategy has provided greater shareholder wealth creation?
3. Calculate the average net profit margin for each company for the five years worth of data obtained. Include your calculations please. Based on these average net profit margins, which company has done a better job of maximizing profits?
4. Did the company achieving the greatest profit maximization also achieve the greatest stockholder wealth maximization? If not, which strategy was more beneficial to the shareholders?
5. Which company's strategy has presented greater risk to the shareholders' investment?
6. Have the investors assuming that greater risk been rewarded with greater investment.
Please see the attached Excel file for the answers to the questions ...
The solution examines GE and tyco/market to book ratios.