Clorox

Hey there,

Saw that you added an interesting discussion thread to the Clorox Company (CLX) page. So, to be clear, I agree with you that it doesn't make sense that a company with negative equity could post so high a market cap, but the way the two are calculate actually has nothing to do with each other.

From our page on Market Capitalization, you can see that market cap equals simply the share price times the number of shares out standing, while total Equity equals total assets minus total liabilities. So, while the company has more liabilities than assets, for some reason investors are willing to pay a high price for shares in the company.

Crazy, I know, but I guess that's the stock market!

Anyway, welcome to Wikinvest, please enjoy the site and let me know if you have any questions.

Armcharles 16:07, May 25, 2009 (PDT)

I'm aware of how they are calculated, but there should be a relationship between the two. I'm still a fan of the price to equity ratio as a valuation measure. Certainly a company with negative equity could have a high market cap if there's a huge expectation of earnings in the future and there seems to be a turnaround due to a management change or restructuring -- but I'm not seeing that with Clorox. ImperfectlyInformed 09:20, May 26, 2009 (PDT)

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