Some balance sheet information is shown here

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(all values in thousands of dollars).

a. What change in the book value of the company's equity took place at the end of 2012?

b. Is the company's market-to-book ratio meaningful? Is its book debt-equity ratio meaningful? Explain.

c. Does the company's book value of equity in 2013 imply that it is unprofitable? Explain.

a. What change in the book value of the company's equity took place at the end of 2012?

The book value of equity

increased

decreased

by

$nothing

million from the end of the previous year, and was

positive

negative

. (Select from the drop-down menus and round to three decimal places.)

b. Is the company's market-to-book ratio meaningful? Is its book debt-equity ratio meaningful? Explain.(Select all the choices that apply.)

A.

Because the book value of equity is positive in this case, the company's market-to-book ratio and its book debt-equity ratio are not meaningful.

B.

Because the book value of equity is positive in this case, the company's market debt-equity ratio may be used in comparison.

C.

Because the book value of equity is negative in this case, the company's market debt-equity ratio may be used in comparison.

D.

Because the book value of equity is negative in this case, the company's market-to-book ratio and its book debt-equity ratio are not meaningful.

c. Does the company's book value of equity in 2013 imply that it is unprofitable? Explain.(Select all the choices that apply.)

A.

Negative book value of equity means the firm will most likely file for bankruptcy.

B.

Negative book value of equity means the firm is unprofitable.

C.

Negative book value of equity does not necessarily mean the firm is unprofitable.

D.

If a firm borrows to repurchase shares or invest in intangible assets (such as R&D), it can have a negative book value of equity.