Question : What is the significance of the book value per share?
Option 1: It determines the market value of the shares
Option 2: It represents the face value of the shares
Option 3: It indicates the value of a share as per the company's books
Option 4: It determines the dividend payout ratio
Correct Answer: It indicates the value of a share as per the company's books
Solution : The correct answer is (c) It indicates the value of a share as per the company's books.
The book value per share is a financial metric that represents the value of a company's equity (assets minus liabilities) divided by the number of outstanding shares. It is calculated by dividing the total shareholder equity by the number of outstanding shares. The significance of the book value per share lies in its ability to provide investors with an indication of the value of a share as per the company's books. It represents the net worth of the company on a per-share basis based on the historical cost of the company's assets and liabilities. The book value per share is particularly useful when evaluating companies with significant tangible assets, such as manufacturing or real estate companies.
