In determining the market value of a company's assets, are current
liabilities like accounts payable including in this determination. 
For example.  A company has the following on it's balance sheet:
Current Liabilities (A/P) $500,000
Long Term debt (6% annual coupon, maturing in 11/2023)  $20,000,000
Common Stock - 2 million shares outstanding ($15.00 per share)
Preferred Stock - 100,000 shares outstanding ($60.00 per share)

What would be the market value of this company's assets?

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Request for Question Clarification by answerguru-ga on 26 Nov 2005 17:50 PST

Hi, just a quick point that isn't clear in your question - are you
looking for the market value of the entire company or the value of
it's assets alone?

If the entire company, this is what someone who is buying the company
would be interested in.

If it's the market value of the assets alone, this is what you would
be able to get if you liquidated the company (in theory).

Thanks,
answerguru-ga

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Clarification of Question by mammabear-ga on 27 Nov 2005 11:08 PST

I'm not looking for liquidating the company.  I know that in terms of
a company's balance sheet that Assets = Liabilities + Equity.  If I
cannot look at the balance sheet, and the only information that is
given to me is the information that I have supplied, would I count the
current liabilities in to figure out the market value of the company's
assets.  My gut instict says that I do need to include it.

I forgot to give the sell price for the bonds.  Let's say they are
selling for $950.00, and that they have a par value of $1,000 at
maturity.

If I work out the market value of each of the items:
Current liabilities = 500,000
Long-term debt = 19,000,000
Common stock = 30,000,000
Preferred stock = 6,000,000
Total liabilities + equity = 55,500,000

So the market value of this company's assets should be $55,500,000.

Correct?

Hi mammabear-ga,

After your clarification, I see where you are coming from in your
original question and can now answer the question for you.

With the additional bond information that you have provided, we now
have all of the pieces required to solve the problem.

The objective of this problem is to manipulate the following equation:

Assets = Liabilities + Equity

Given that, as long as we are guaranteed that the listing of
liabilities and equity are complete (including ALL current
liabilities), we can determine the asset value of the company.

I am verifying that in order to determine the asset value of the
company, both of the steps you have taken are correct:

1. Include all liabilities provided (current and long term) as well as all equity.

2. The correct valuation for the bonds is today's selling price and
not the face value.

Therefore the total market value of this company's assets will be $55,500,000.

If you need any further clarification please don't hesitate to ask.

Cheers,
answerguru-ga