To calculate the Market-Value-to-Book-Value (MV/BV) ratio, we need the following information:

• Market Value (MV) of equity, which is calculated as: $\text{MV of equity} = \text{Stock Price} \times \text{Number of Shares}$

• Book Value (BV) of equity, which is calculated from the balance sheet as: $\text{BV of equity} = \text{Total Assets} - \text{Total Liabilities}$

Let's calculate each step.

1. Market Value of Equity

Given:

• Stock price at the end of 2003 = $15
• Number of shares = 100

$\text{MV of equity} = 15 \times 100 = 1500$

2. Book Value of Equity

Total Assets at the end of 2003:

We add up current and fixed assets at year-end 2003.

$\text{Total Current Assets} = \text{Cash} + \text{Marketable Securities} + \text{Accounts Receivable} + \text{Inventory}$ $\text{Total Current Assets} = 600 + 300 + 800 + 2000 = 3700$

The net fixed assets are given as $3000 for 2003.

$\text{Total Assets} = 3700 + 3000 = 6700$

Total Liabilities at the end of 2003:

We add up the short-term and long-term liabilities:

• Notes Payable = $1600
• Accounts Payable = $2000
• Long-term Debt = $4000

$\text{Total Liabilities} = 1600 + 2000 + 4000 = 7600$

Now, the book value of equity is:

$\text{BV of equity} = \text{Total Assets} - \text{Total Liabilities} = 6700 - 7600 = -900$

The negative book value of equity occurs because the company has more liabilities than assets in 2003.

3. Market-Value-to-Book-Value Ratio

Finally, the MV/BV ratio is:

$\text{MV/BV ratio} = \frac{\text{Market Value of Equity}}{\text{Book Value of Equity}} = \frac{1500}{-900}$

Since the book value is negative, the Market-Value-to-Book-Value ratio is not directly meaningful in a typical sense. In practical terms, this suggests the company is highly leveraged or has significant liabilities.

Would you like more details on these calculations or further breakdowns?

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Here are 5 follow-up questions:

1. What does a negative book value of equity typically signify about a company's financial health?
2. How can changes in liabilities and assets affect the Market-to-Book ratio?
3. How would a decrease in liabilities impact the book value of equity?
4. What other financial ratios might provide insights into Yung.com's performance in 2003?
5. Why is the stock price still positive despite the negative book value of equity?

Tip: A negative book value of equity indicates the company owes more than its assets can cover, a potential red flag for investors.