US CMA Part 2 · Chapter 2 · Question 9 of 15
Thornbury Inc. has total shareholders' equity of $5,600,000, which includes preferred stock with a liquidation value of $800,000. There are 400,000 common shares outstanding and the market price is $18.00 per share. What is the market-to-book ratio of the common stock?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 1.50
Explanation
Book value per common share = (total equity - preferred equity) / common shares = ($5,600,000 - $800,000) / 400,000 = $12.00. Market-to-book = $18.00 / $12.00 = 1.50. Failing to remove the preferred stock gives a book value of $14.00 and a ratio of 1.29.
More Financial statement analysis: profitability, market measures and special issues MCQs
- Q11Which of the following is the strongest indicator of LOW earnings quality?
- Q12During a period of steadily rising purchase prices and stable inventory quantities, a US company using LIFO, compared with an otherwise…
- Q13A US parent consolidates a subsidiary whose functional currency is the euro, using the current rate method. During the year the euro…
- Q14During the year Vance Software improperly capitalized $400,000 of routine maintenance costs that should have been expensed. The costs were…
- Q15Which inventory cost flow method is permitted under US GAAP but prohibited under IFRS?