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Klingon corporation had the following operating results for 2014: Total assets = $20,000; Fixed assets =...

Klingon corporation had the following operating results for 2014: Total assets = $20,000; Fixed assets = $12,000; NWC = $3,000; Long-term debt = $5,000; Number of shares outstanding = 1,000; Share price = $70; Net sales of $100,000. What is the market value and book value of equity? What is market-to-book ratio (M/B)?

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Answer #1

Total assets = $20000

Fixed assets or Non-current assets = $12000

Current assets = $20000-$12000 = $8000

NWC = current assets - current liabilities

$3000=$8000 - current liabilities

current liabilities= $5000

Long term debt or Non current liability= $5000

Total liabilities = Current + Non current liability = $5000+$5000 = $10000

The market value of equity = Number of shares outstanding * share price = 1000*70 = $70000

The book value of equity = Total assets - Total liabilities = $20000 - $10000 = $10000

Market to Book ratio = 70000/10000 = 7/1

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