Smith Corporation's balance sheet reflects total assets of $3 million as of December 31, 2017 and total liabilities of $1.8 million. Smith has 100,000 shares of common stock outstanding. The market value of the stock is $9 per share. Smith's market to book ratio is:

Question

Quizplus · Accepted Answer

The market to book ratio is calculated by dividing the market value of the company by its book value. The book value is calculated as total assets minus total liabilities, which is $3 million - $1.8 million = $1.2 million. The market value of the company is the market price per share times the number of shares outstanding, which is $9 * 100,000 = $900,000. Therefore, the market to book ratio is $900,000 / $1,200,000 = 0.75.

Smith Corporation's Balance Sheet Reflects Total Assets of $3 Million