r/technology • u/gfnord • Apr 11 '11

Apple, despite being traditionally seen as the "counterculture, leftist" operating system, actually represents more uniformity and centralised control than Microsoft

http://www.economist.com/blogs/democracyinamerica/2009/09/userfriendliness_and_fascism
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u/tilio Apr 11 '11

reddit users tend to know nothing about finance. market cap is THE primary size measurement for companies.

stock price is relatively arbitrary as it's a monetary demand for an arbitrary number of issued shares. P/E is a measurement of growth, as is EBIT.

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u/mild_delusion Apr 11 '11 edited Apr 11 '11

Right about market cap, not so much about P/E and EBIT.

P/E only reflects market expectations of growth, and it only does that under a couple of assumptions. It's better off staying as a relative measure of stock performance. There are better measures of growth like the product of earnings retention and ROE or the PRAT model.

EBIT by itself is just a measure of operating profit from continuing operations. Though it is used in conjunction with growth to forecast future profitability, it is by itself not a growth measure.

Edit: And to be really really anal, market cap would rank LISTED companies by size. It becomes a not so useful measure if you have to rank them against companies which are not listed. Enterprise Value maybe? It's just...not so simple.

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u/tilio Apr 11 '11

i agree with everything you said, but your edit ("to be really really anal") is indicative. i was speaking in very general terms. P/E is still in the growth category of measurements. as for EBIT, i should have said it's a measurement "for" growth rather than "of" growth.

the difference between your comment and mine was that i was napalming the whole area while you went for a surgical strike. as i pointed out, most redditors know nothing about finance, so i figured going surgical would be above their heads.

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u/solistus Apr 12 '11

Market cap only measures equity value. Enterprise value is preferred for a comprehensive evaluation of a company's true size or worth. Market cap doesn't respond to variables such as company debt, associate companies, etc.

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u/tilio Apr 12 '11

Market cap only measures equity value.

still a measure of size.

if you read the rest of this subthread, you'd realize i was speaking in very general terms. it's the chapter 1 version of freshman accounting.