Reference no: EM13826958

Problem:

 1. Use the figure for the following question

Balance Sheet
Assets		Liabilities
Current Assets		Current Liabilities
Cash	50	Accounts Payable	42
Accounts receivable	22	Notes Payable/ short-term debt	7
Inventories	17
Total Current Assets	89	Total Current Liabilities	47
Long-Term Assets		Long-Term Liabilities
Net Property, Plant and Equipment	121	Long-term debt	128
Total Long-term Assets	121	Total long-term debt	128
		Total Liabilities	177
		Shareholders' Equity	33
Total Assets	210	Total Liabilities And Shareholders' Equity	210

The above table shows a balance sheet for a certain company. All quantities shown are in millions of dollars. If the company has 4 million shares outstanding and these shares are trading at a price of $8.24 per share, what does this tell you about how investors view this firm's book value?

A. Investors consider that the firm's market value is worth very much less than its book value

B. Investors consider that the firm's market value is worth less than its book value

C. Investors consider that the firm's market value and its book value are roughly equivalent.

D. Investors consider that the firm's market value is worth more than its book value.

2. Which ratio would you use to measure the financial health of a firm by assessing that firm's leverage?

A. Debt-equity or equity multiplier ratio

B. Market-to-book ratio

C. Market debt-equity ratio

D. Current or quick ratio

Summary of problem:

These short questions are from Finance. The 1^st question is about checking whether the book value of shares is similar to the market value of the shares. The 2^nd question is about the measure used to assess the financial health of a firm with its leverage.