In July 2005, American Airlines (AMR) had a market capitalization of $2.3 billion, debt of $14.3 billion, and cash of $3.1 billion. American Airlines had revenues of $18.9 billion. British Airways (BAB) had a market capitalization of $5.2 billion, debt of $8.0 billion, cash of $2.9 billion, and revenues of $13.6 billion.
Between the comparison of the market capitalization to revenue ratio for American Airlines and British Airways and the comparison of the enterprise value – to revenue ratio for American Airlines and British Airways, which of these comparisons is more meaningful? Explain.
