
At year-end 2002, Yung.com had notes payable of $1200, accounts payable of $2400, and long-term debt of $6000. Corresponding entries for 2003 are $1600, $2000, and $4000. Asset values are below. During 2003, Yung.com had sales of $3000, cost of goods sold of $400, depreciation of $100, and interest paid of $150. The (average) tax rate is 21%, and all taxes are paid currently. The company has 100 shares of common stock outstanding with a stock price of $15 at the end of 2003. Total dividends paid is $120 in 2003.

 

Current Asset

2002

2003

 

 

 

Cash

$700

$500

 

 

 

Marketable securities

400

300

 

 

 

Accounts receivable

900

800

 

 

 

Inventory

1800

2000

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

 

 

Net Fixed Asset (Plant&Equipment)

$7000

$6000

 

 

 

 

 

In 2003, the Market-value-to-Book-value ratio is ______________% 

To calculate the Market-value-to-Book-value (MV/BV) ratio for Yung.com at year-end 2003, we'll follow these steps:

### 1. **Book Value of Equity (BV):**
We calculate the book value of equity as:

\[
BV = \text{Total Assets} - \text{Total Liabilities}
\]

#### **Total Assets (2003)**:
Sum up the current assets and fixed assets for 2003:
- **Cash (2003):** $500
- **Marketable securities (2003):** $300
- **Accounts receivable (2003):** $800
- **Inventory (2003):** $2000
- **Net Fixed Asset (2003):** $6000

\[
\text{Total Assets (2003)} = 500 + 300 + 800 + 2000 + 6000 = 9600
\]

#### **Total Liabilities (2003)**:
Add the notes payable, accounts payable, and long-term debt for 2003:
- **Notes payable (2003):** $1600
- **Accounts payable (2003):** $2000
- **Long-term debt (2003):** $4000

\[
\text{Total Liabilities (2003)} = 1600 + 2000 + 4000 = 7600
\]

#### **Book Value of Equity (BV):**

\[
BV = 9600 - 7600 = 2000
\]

### 2. **Market Value of Equity (MV):**
The market value of equity is the stock price multiplied by the number of shares outstanding.

\[
MV = \text{Stock price} \times \text{Number of shares} = 15 \times 100 = 1500
\]

### 3. **Market-value-to-Book-value (MV/BV) Ratio:**

\[
\text{MV/BV ratio} = \frac{\text{Market Value}}{\text{Book Value}} = \frac{1500}{2000} = 0.75
\]

To express this as a percentage:

\[
\text{MV/BV ratio} = 0.75 \times 100 = 75\%
\]

### **Answer:** The Market-value-to-Book-value ratio is **75%**.

Would you like more details on any part of this calculation? Let me know if you have questions or want further clarification.

Here are 5 related questions to further your understanding:
1. How would the MV/BV ratio change if the stock price increased?
2. What is the significance of the MV/BV ratio in evaluating a company’s financial health?
3. How would a change in total liabilities affect the book value of equity?
4. Why might a company’s market value be lower than its book value?
5. What other financial ratios would complement the MV/BV ratio for a complete analysis?

**Tip:** The Market-value-to-Book-value ratio is often used by investors to determine if a stock is undervalued or overvalued compared to the company's accounting value.

At year-end 2002, Yung.com had notes payable of $1200, accounts payable of $2400, and long-term debt of $6000. Corresponding entries for 2003 are $1600, $2000, and $4000. Asset values are below. During 2003, Yung.com had sales of $3000, cost of goods sold of $400, depreciation of $100, and interest paid of $150. The (average) tax rate is 21%, and all taxes are paid currently. The company has 100 shares of common stock outstanding with a stock price of $15 at the end of 2003. Total dividends paid is $120 in 2003. In 2003, the Market-value-to-Book-value ratio is ______________%

Explore the detailed calculation of Yung.com's Market-value-to-Book-value ratio for the year 2003. Learn about financial ratios, market value, and book value concepts with step-by-step guidance, including the use of assets, liabilities, and stock price data. Suitable for business students and financial analysts.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation