How do you calculate the book value per share of common stock?

Total Common Stockholder’s Equity / Number of Common Shares More test answers on https://studyhippo.com/corporate-finance-test-1/

Which of the following ratios is a measure of profitability, operating results, and efficiency? a. Rate of return on total assets b. Ratio of stockholders’ equity to total equities c. Inventory turnover d. Book value per share of common stock

a. Rate of return on total assets More test answers on https://studyhippo.com/finance-ch-3/

If a company only has common stock outstanding, book value per share is computed as total stockholders’ equity divided by the number of common stock shares outstanding.

True More test answers on https://studyhippo.com/accounting-chapter-15/

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Book Value Per Share Flashcards, test questions and answers

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What is Book Value Per Share?

Book Value Per Share (BVPS) is a measure of a company’s net worth per share, calculated by dividing the total shareholders’ equity by the number of outstanding shares. BVPS gives investors an indication of how much their investment is worth if the company were to liquidate its assets and pay off all its liabilities on hand. It can be used to compare companies within an industry or sector, or to compare companies across different sectors.The main advantage of BVPS is that it reflects a company’s performance without taking into account market fluctuations and other external factors that may influence its stock price. This makes it useful for analyzing long-term trends in a company’s financial health and performance. However, investors should keep in mind that book value does not take into account potential intangible assets such as customer loyalty or brand recognition, which can be valuable drivers of business success but are often difficult to quantify.In order to calculate BVPS, investors must first subtract total liabilities from total assets (on both balance sheet and income statement) to arrive at shareholders’ equity. Then this figure is divided by the number of outstanding shares to arrive at BVPS. A higher book value per share indicates better financial health overall; conversely, a lower book value could indicate weak fundamentals or declining profitability over time. Additionally, low BVPS relative to peers could signal an opportunity for bargain hunters looking for undervalued stocks with strong upside potential. Overall, Book Value Per Share serves as an important tool in investment analysis and can help investors identify opportunities while avoiding overpriced stocks with poor fundamentals.