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Accounting, 8th edition Cu nte nts } Book Value per Share of Common Stock Book value per share of common stock is common equity divided by the number of
common shares outstanding. Common equity equals total stockholders' equity less
preferred equity. Greg‘s has no preferred stock outstanding. Its houk-vaiue-per-
share—of—common-stock ratios follow. [Note that 10,000 shares of common stock
were outstanding.) Bmk Value per Share of
Greg’s Groovy Tunes’ Common Stock Formula 2012 201 1
Book value stockholders: - 1’33?
per share of = equity $356,000 — $0 2 $35.50 $320,000— $0 = $3100
common stock Number of shares 10,000 10,000
of common stock
outsmnding Many experts argue that book value is not useful for investment analysis. It
bears no relationship to market value and provides little information beyond stock-
holders’ cqmty reported on the balance sheet. But some investors base their invest—
ment decisions on book value. For example, some investors rank stocks on the basis
of the ratio of market price to book vaiue. To dnese inthors, the lower the ratio1 the more attractive the stack. ...
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- Spring '11