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Calculating Ratios. According to the financial statements for Samson Electronics, Inc., the firm has total assets valued at$220 million. It also has total liabilities of $140 million. Company records indicate that the firm has issued 2 million shares ofstock (Obi 3)a. Based on the above information, calculate the book value for a share of Samson Electronics.b. If a share of Samson Electronics, Inc, currently has a market value of $50 a share, what is the market-to-book ratio?c Based on the market-to-book ratio, is a share of Samson Electronics overpriced or underpriced? Explain your answer.

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Answer:

a.  book value for a share of Samson Electronics =  Net Asset of the company / Numbers of common share

                                                            = $220million - $140million

                                                                           2million

                                                           =  $80million

                                                                  2million

                                                           =     $40 per share

b. Market - to- book ratio =  market value per share / book value per share

                                          =   $50/$40

                                          = 1.25

Based on the market - to -book ratio, the share  Samson Electronics is overpriced. Where the market-to-book ratio of share of a company is higher than 1, it indicates that the share is overvalued.

Explanation:

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