Question

The ABC Corporation only issues common stock. To calculate this firm's book value per share of common stock, _________ would be divided by the number of shares of common stock outstanding?

1) total assets
2) total stockholders equity
3) preferred dividends in arrears
4) the call value of preferred stock

Answer 1

The book value per share of common stock for a firm that only issues common stock is found by dividing the total stockholders equity by the number of shares of common stock outstanding.

Step-by-step explanation:

To calculate the book value per share of common stock for ABC Corporation, which only issues common stock, you would divide total stockholders equity by the number of shares of common stock outstanding. The book value per share of common stock for a firm that only issues common stock is found by dividing the total stockholders equity by the number of shares of common stock outstanding.

Total stockholders equity represents the amount that the shareholders would theoretically receive if the firm were liquidated, after all liabilities have been paid off. This figure does not include preference to preferred stock since the corporation only issues common stock, which means there is no allocation for preferred dividends or the call value of preferred stock.