Originally posted as a comment to this blog, in which it was proposed that Assets to Liabilities was a reasonable way of valuing SIRI, the Sirius XM Corporation.
Assets are a funny thing. I don't see Sirius' satellites as "fixed assets." I own a corporation. An expensive desk, or a medical exam table, is a fixed asset. If my corporation goes bankrupt someone else can buy it and use it. There are always people using desks and exam tables. They are fungible commodities. Same goes for a mountain of coal. Folks always want coal - to make steel, to make power, whatever. If my company goes out of business my mountain of coal can be put in railroad cars and sold at market price.
I do not really see a radio-delivering satellite in geosynchronous orbit quite the same way. People want satellite radio. That gives SIRI's satellite value. But it has value as long as people want satellite radio, which not incidentally is SIRI's business plan. If SIRI fails, it is more likely because people are *not* willing to pay for satellite radio; and in that scenario, SIRI's satellites do not have much value. That scenario is more like a gold miner. They may list the mine on the books as worth $450 million due to the gold that they believe is in it, but if it turns out there is no gold in the mine, not only will they go out of business, but their "fixed asset," the mine, will not have any value either.
A more reasonable metric for SIRI is debt to equity, or debt to income. Look those up yourself, and compare them to other companies - you wouldn't believe me if I told you.