Fortune annually provides a list of the most valuable companies in America. The top 1 most valuable companies, from the 1999 Fortune 500, are listed below.

As an analyst for a securities broker, you are asked the following questions concerning some of the figures.
1. Microsoft has total assets of \($22\) billion but a stock market value of \($418\) billion. How can a company be worth more than its total assets?
2. For each company, compute the ratio of total assets to total market value. What factors must the market be considering in valuing these companies that are not captured on the companies' balance sheets?
3. The price-earnings ratio, often called the P/E ratio, is defined as market price per share divided by earnings per share. Alternatively the P/E ratio can be computed as total market value divided by net income. Compute the P/E ratios for the companies listed above. What factors do you think influence P/E ratios?

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(In millions of U.S. dollars) Company Name MICROSOFT GENERAL ELECTRIC WAL-MART Market Industry Value Total Assets Net Income computers $418,579 $ 22,357 $4,490 electronics and machinery 360,251 355,935 9,296 retailing 212,850 49,271 4,430 MERCK INTEL PFIZER AT&T EXXON COCA-COLA CISCO SYSTEMS pharmaceuticals telecommunications energy soft drinks networking pharmaceuticals 198,868 31,853 5,248 computers 196,616 31,471 6,068 182,211 18,302 3,351 180,156 59,550 6,398 189,913 92,630 6,370 169,350 19,145 3,533 166,616 8,917 1,350