Question

Here are simplified financial statements of Phone Corporation from a recent year:

INCOME STATEMENT (Figures in millions of dollars)
Net sales	12,400
Cost of goods sold	3,660
Other expenses	4,137
Depreciation	2,278
Earnings before interest and taxes (EBIT)	2,325
Interest expense	645
Income before tax	1,680
Taxes (at 30%)	504
Net income	1,176
Dividends	796

BALANCE SHEET (Figures in millions of dollars)
	End of Year	Start of Year
Assets
Cash and marketable securities	81	150
Receivables	1,982	2,330
Inventories	147	198
Other current assets	827	892
Total current assets	3,037	3,570
Net property, plant, and equipment	19,893	19,835
Other long-term assets	4,136	3,690
Total assets	27,066	27,095
Liabilities and shareholders’ equity
Payables	2,484	2,960
Short-term debt	1,379	1,533
Other current liabilities	771	747
Total current liabilities	4,634	5,240
Long-term debt and leases	9,010	8,265
Other long-term liabilities	6,098	6,069
Shareholders’ equity	7,324	7,521
Total liabilities and shareholders’ equity	27,066	27,095

Phone Corp.’s stock price was $76 at the end of the year. There were 197 million shares outstanding.

a.	What was the company’s market capitalization and market value added? (Enter your answers in billions rounded to 2 decimal places.)

Market capitalization	$  billion
Market value added	$  billion

b.	What was its market-to-book ratio? (Round your answer to 2 decimal places.)

Market-to-book ratio

Answer 1