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BALANCE SHEET AND MARKET VALUE OF KMART'S LIABILITIES

I need assistance with the following assignement:

Refer to your company's most recent balance sheet. Review the 'liabilities and equity side' of the balance sheet.

(a) Short term liabilities (or debt)

Find our from the balance sheet of the company the total of the short term liabilities (also called 'short term debt'). You may assume that the market value of the short term debt is equal to the balance sheet or the 'book value' of the short term debt.

(b) Long term liabilities (or debt)

You may assume that the market value of the long term liabilities is equal to the balance sheet values.

(c) Equity

The market value of equity is by definition equal to the number of shares outstanding times the market price per share. Find out the number of shares outstanding and the recent price per share. Then multiply one by the other in order to find the market value of equity of your company. If you have a problem finding our the number of shares outstanding you may go to http://finance.google.com and insert the name of your company. The market value of equity of your company is what is called Mkt Cap that is market capitalization. An alternative site is http://finance.yahoo.com where again you insert your company's name and get the market capitalization.

(d) The Market Value of the Enterprise

Now prepare a short table that contains the following:

Company name:...........................

Source of Funds Balance sheet value as of ... Market Value as of ...

Short term liabilities

Long term liabilities

Equity

Total

Compute the debt ratio of your company (total liabilities divided by the total liabilities plus equity) and the debt to equity ratio, (total liabilities divided by total equity) based on balance sheet values and based on 'market values'. Then write a two to three page report on the results of your computations.

Thanks in advance for the time and assistance

Solution Preview

Refer to your company's most recent balance sheet. Review the 'liabilities and equity side' of the balance sheet.

in$mn
Year 2008
(a) Short term liabilities (or debt) 404.00
( I have taken short term debt+ Current potion of long term debt)
Find our from the balance sheet of the company the total of the short term liabilities (also called 'short term debt'). You may assume that the market value of the short term debt is equal to the balance sheet or the 'book value' of the short term debt.

(b) Long term liabilities (or debt) 2,606.00

You may assume that the market value of the long term liabilities is equal to the balance sheet values.

(c) Equity
Book value= 10,667.00
Market value= 11,730.00
http://moneycentral.msn.com/companyreport?Symbol=US%3aSHLD
The market value of equity is by definition equal to the number of shares outstanding times the market price per share. Find out the number of shares outstanding and the recent price per share. Then multiply one by the other in order to find the market value of equity ...

Solution Summary

This explains the steps to compute balance sheet and market value of liabilities and equity by taking the example of Kmart

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