Which one of the following statements about book value per share is most correct?
A) Market price per common share usually approximates book value per common share.
B) Book value per common share is based on past transactions whereas the market price of a share of stock mainly reflects what investors expect to happen in the future.
C) A market price per common share that is greater than book value per common share is an indication of an overvalued stock.
D) Book value per common share is the amount that would be paid to stockholders if the company were sold to another company.

Question

Quizplus · Accepted Answer

Book value per share is based on historical values, such as assets minus liabilities, whereas market price reflects investors' expectations of future performance. A, C, and D are incorrect statements. Market price may or may not approximate book value, and a higher market price does not necessarily indicate an overvalued stock. Book value per share represents the amount of net assets that would be distributed to shareholders if the company were liquidated, not sold to another company.

Which One of the Following Statements About Book Value Per