cruise industry bigger companies can cut down variable costs and achieve other synergies that will make them more efficient. Royal Caribbean had a book-to-market ratio of 153% in 2011. As their market share slid in 2012 so did the book-to-market ratio. Nevertheless the ratio stayed above 1 for Royal Caribbean. Carnival Corporation also experienced a decline in book to market ratio. The decline for Carnival was only half the fall Royal Caribbean experienced. The book-to-market ratio fell below 1 to 98.7% in 2012 for Carnival Corporation. The down turn in book-to-market ratio was 50% at Royal Caribbean and 20% at Carnival Corporation. Based on the book-to-market ratio, Carnival Corporation is a riskier investment. The book-to-market ratio being below 1 means the company does not have the assets to support the stock price. It could also imply that part of the stock price is based on intangible value. The intangible value that I feel makes up for the difference is the value of being in the cruise industry and the added value of having almost half of the market share. The higher book-to-market ratio at Royal Caribbean means the market does not have as much faith in the firm as they do in Carnival. Royal stock price was worth more Caribbean’s than the book value of the assets for both years.
cruise industry bigger companies can cut down variable costs and achieve other synergies that will make them more efficient. Royal Caribbean had a book-to-market ratio of 153% in 2011. As their market share slid in 2012 so did the book-to-market ratio. Nevertheless the ratio stayed above 1 for Royal Caribbean. Carnival Corporation also experienced a decline in book to market ratio. The decline for Carnival was only half the fall Royal Caribbean experienced. The book-to-market ratio fell below 1 to 98.7% in 2012 for Carnival Corporation. The down turn in book-to-market ratio was 50% at Royal Caribbean and 20% at Carnival Corporation. Based on the book-to-market ratio, Carnival Corporation is a riskier investment. The book-to-market ratio being below 1 means the company does not have the assets to support the stock price. It could also imply that part of the stock price is based on intangible value. The intangible value that I feel makes up for the difference is the value of being in the cruise industry and the added value of having almost half of the market share. The higher book-to-market ratio at Royal Caribbean means the market does not have as much faith in the firm as they do in Carnival. Royal Caribbean’s stock price was worth more than the book value of the assets for both years.
WedderburnThesis.docx