Question: In Module 2, we discussed how accounting-based balance sheets don't represent the true value of a company. We discussed Facebook's balance sheet based on book

In Module 2, we discussed how accounting-based balance sheets don't represent the true value of a company. We discussed Facebook's balance sheet based on book values... Facebook Balance Sheet ASSETS (BOOK VALUE) LIABILITIES AND EQUITY (BOOK VALUE) Cash $18B Debt $5B Net Operating Assets $31B Equity $44B ...and Facebook's balance sheet using market values: Facebook Balance Sheet (Market) ASSETS (MARKET VALUE) LIABILITIES AND EQUITY (MARKET VALUE) Cash $18B Debt $5B Net Operating Assets ???? Equity $300B What is the Market-to-Book ratio for Facebook's equity? Dividing the market value of its equity, $300 billion, by the book value of its equity, $44 billion, yields a Market-to-Book Ratio of 6.8. What does this ratio mean and how does it correspond to the process of value creation? Why is Facebook's market value of equity so much higher than its book value? Think back to Module 2 and the lessons from that module. What do you think determines market value?

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The MarkettoBook ratio is a metric used to evaluate the relationship between a companys market value and its book value In the case of Facebook the ra... View full answer

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