Fields, Inc., has the following book value balance sheet:

a. What is the debt-equity ratio based on book values?

b. Suppose the market value of the company’s debt is $180 million and the market value of equity is $590 million. What is the debt-equity ratio based on market values?

c. Which is more relevant, the debt-equity ratio based on book values or market values? Why?

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Current assets Net fixed assets Total assets Assets $ 125,000,000 Total debt Equity Common stock Capital surplus Accumulated retained earnings $ 230,000,000 Total shareholders' equity $ 355,000,000 Total debt and shareholders' equity Total Debt and Equity $ 170,000,000 $ 15,000,000 70,000,000 100,000,000 $ 185,000,000 $ 355,000,000