The balance sheet and income statement shown below are for Pettijohn Inc. Note t

Question

The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Millions of $) ala Assets Cash and securities Accounts receivable 2016 1,554.0 9,660.0 13,440.0 $24,654.0 17,346.0 $42,000.0 Total current assets Net plant and equipment Total assets Liabilities and Equity Accounts payable Notes payable Accruals Total current liabilities Long-term bonds Total liabilities Common stock Retained earnings Total common equity $7,980.0 5,880.0 4,620.0 $18,480.0 10,920.0 $29,400.0 3,360.0 9,240.0 $12,600.0 $42 000.0

Explanation / Answer

Correct option is > 1.08

Total book value of equity = Common stock + Retained earning

Total book value of equity = 3360 + 9240

Total book value of equity = 12600

Now, we can calculate Market value of equity:

Market value of equity = Share outstanding x Stock price

We have been given both the values;

Market value of equity = 175 x 77.69

Market value of equity = 13595.75

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Now, we can calculate the Market to Book Ratio:

Market to Book Ratio = Market value of equity / Total book value of equity

Market to Book Ratio = 13595.75 / 12600 = 1.0790278

Market to Book Ratio = 1.08

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