Book value per share of common stock is calculated by dividing the
A) number of common shares outstanding at year end by the common stockholders' equity.
B) net income available to common stockholders by the average number of common shares outstanding.
C) common stockholders' equity by the number of common shares outstanding at year end.
D) total liabilities by the total stockholders' equity.

Question

Quizplus · Accepted Answer

Book value per share of common stock is calculated by dividing the common stockholders' equity by the number of common shares outstanding at year end. This provides the amount of net assets per share that would be distributed to common stockholders if the company were to liquidate. Option A only provides the number of common shares outstanding, not the equity value, while option B calculates net income per share instead of book value per share. Option D calculates the debt-to-equity ratio.

Book Value Per Share of Common Stock Is Calculated by Dividing