Question: market multiple ratios for Lula Instruments Inc…
Calculate the following market multiple ratios for Lula Instruments Inc. at its 2015 financial year-end:
i.EV/EBITDA ii.Price-to-earnings ratio (PE ratio)
iii.Price-to-cash-flow ratio
iv.Contrast and explain the results of the different market multiple ratios that you calculated.
- Evaluate the usefulness of market multiple ratios in company valuation
Consolidated Balance Sheets December 31, 2015
(Millions of dollars, except share amounts)
Assets
| Consolidated Balance Sheets | |||
| (Millions of dollars, except share amounts) | |||
Share price
|
|||
| Assets | |||
| Cash and cash equivalents | 1,000 | ||
| Short-term investments | 2,218 | ||
| Accounts receivable, net of allowances of ($7) and ($12) | 1,165 | ||
| Raw materials | 109 | ||
| Work in process | 846 | ||
| Finished goods | 736 | ||
| Inventories | 1,691 | ||
| Prepaid expenses and other current assets | 1,000 | ||
| Total current assets | 7,074 | ||
| Property, plant and equipment at cost | 5,465 | ||
| Accumulated depreciation | -2,869 | ||
| Property, plant and equipment, net | 2,596 | ||
| Long-term investments | 221 | ||
| Goodwill, net | 4,362 | ||
| Acquisition-related intangibles, net | 1,583 | ||
| Deferred income taxes | 201 | ||
| Capitalized software licenses, net | 46 | ||
| Overfunded retirement plans | 85 | ||
| Other assets | 62 233 | ||
| Total assets | $ 16,230 | ||
| Liabilities and stockholders’ equity | |||
| Current liabilities: | |||
| Current portion of long-term debt | $ 1,000 | ||
| Accounts payable | 386 | ||
| Accrued compensation | 664 | ||
| Income taxes payable | 95 | ||
| Accrued expenses and other liabilities | 410 | ||
| Total current liabilities | 2,555 | ||
| Long-term debt | 3,120 | ||
| Underfunded retirement plans | 196 | ||
| Deferred income taxes | 37 | ||
| Deferred credits and other liabilities | 376 | ||
| Total liabilities | 6,284 | ||
| Stockholders’ equity: | |||
| Preferred stock, $25 par value. Authorized – 10,000,000 shares | |||
| Participating cumulative preferred. None issued | 0 | ||
| Common stock, $1 par value. Authorized – 2,400,000,000 shares | |||
| Shares issued – 1,740,815,939 | 1,741 | ||
| Paid-in capital | 1,629 | ||
| Retained earnings | 31,176 29,653 | ||
| Treasury common stock at cost | |||
| Shares: 2015 – 729,547,527; 2014 – 694,189,127 | -24,068 | ||
| Accumulated other comprehensive income (loss), net of taxes (AOCI) | -532 | ||
| Total stockholders’ equity | 9,946 | ||
| Total liabilities and stockholders’ equity | $ 16,230 |
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