Book and liquidation value The balance sheet for Ghalib Industries is as follows.

Additional information with respect to the firm is available:
(1) Preferred stock can be liquidated at book value.
(2) Accounts receivable and inventories can be liquidated at 90 percent
of book value.
(3) The firm has 10,000 shares of common stock outstanding.
(4) All interest and dividends are currently paid up.
(5) Land and buildings can be liquidated at 130 percent of book value.
(6) Machinery and equipment can be liquidated at 70 percent of book value.
(7) Cash and marketable securities can be liquidated at book value.
Given this information, answer the following.
a. What is Ghalib Industries' book value per share?
b. What is its liquidation value per share?
c. Compare, contrast, and discuss the values found in parts a and b.

Transcribed Image Text:

Ghalib Industries Balance Sheet December 31 Assets Liabilities and Stockholders' Equiry Cash Marketable securities Accounts receivable US$ 40,000 60,000 120,000 160,000 US$380,000 Accounts payable Notes payable Accrued wages US$100,000 30,000 30,000 US$160,000 USS 180,000 Total current liabilities Long-term debt Total current assets Land and buildings (net) US$150,000 Preferred stock Common stock (10,000 USS 80,000 Machinery and equipment250,000 Total fixed assets (netl US$400,000 shares) Retained earnings Total liabilities and 260,000 Total assets US$780,000 stockholders' equity US$780,000