and debtattheend ofthemost recentfinancial year.Our
objectivewastoarriveatasampleoftelecomfirmsthathave
a significant likelihood of distress. The following table
summarizes the enterprise value-to-book capital ratios for
these firms:
Global Crossing trades at 50% of book capital invested,
significantly lower than the average ratio across these
distressedfirms.Wecouldviewthisasindicativeofthefact
that Global Crossing is undervalued on a relative basis,
thoughthatconclusionwouldbejustifiedonlyifweassume
that the firms are exposed to equal degrees to financial
distress.
Adjusting the Multiple
Asecondpossibilityistolookforobjectivewaysofadjusting
themultiplefordistress.Consideronepossiblesolution:We
couldexaminethemultipleofrevenuesoroperatingincome