Equinox Bioengineering began operations in January of 2015.In its first year of operation, sales were $85 million and the net loss was $(5.1 million).Free cash flow was $(300,000).Equinox has 10 million shares outstanding.If you think the price to sales ratio for this company should be 1 or less, what is the most you should pay per share.

Question

Quizplus · Accepted Answer

If the price to sales ratio should be 1 or less, the market capitalization should not be more than the sales revenue. Therefore, the most you should pay per share is $8.50, which is calculated by dividing $85 million by the 10 million outstanding shares. Answer A is too high, and answer C is the net loss, not the sales revenue. Answer D is not applicable as the company has sales revenue and is operating.

Equinox Bioengineering Began Operations in January of 2015