Which one of the following statements related to book value per share (BVPS)is correct?
A)BVPS is equal to total assets divided by the number of shares outstanding.
B)An increase in the market value of a firm's fixed assets will increase the firm's BVPS.
C)The payment of a dividend increases BVPS.
D)BVPS is equal to the market price of a share of stock.
E)The issuance of new shares at market value may increase the BVPS.

Question

Quizplus · Accepted Answer

BVPS is calculated as total equity divided by the number of shares outstanding. When new shares are issued at market value, the total equity of the firm increases, which in turn increases the BVPS. Therefore, statement E is correct. A, B, and C are incorrect statements. Statement D is incorrect because BVPS is based on book value, not market value.

Which One of the Following Statements Related to Book Value