Retained Earnings Take a look at the balance sheet for Starbucks. On it, retained earnings are about $2.2 billion. How do you interpret this amount? Does it mean that Starbucks has $2.2 billion in cash available to spend?
Price Ratios Peninsular Research has a client who has inquired about the valuation method best suited for comparison of companies in an industry that has the following characteristics:
Principal competitors within the industry are located in the United States, France, Japan, and Brazil.
The industry is currently operating at a cyclical low, with many firms reporting losses. The industry is subject to rapid technological change.
John Jones, CFA, recommends that the client consider the price earnings ratio, price book value ratio, and price sales ratio. Determine which one of the three valuation ratios is most appropriate for comparing companies in this industry. Support your answer with two reasons that make that ratio superior to either of the other two ratios.