Question 467 book and market values
Which of the following statements about book and market equity is NOT correct?
(a) The market value of equity of a listed company's common stock is equal to the number of common shares multiplied by the share price.
(b) The book value of equity is the sum of contributed equity, retained profits and reserves.
(c) A company's book value of equity is recorded in its income statement, also known as the 'profit and loss' or the 'statement of financial performance'.
(d) A new company's market value of equity equals its book value of equity the moment that its shares are first sold. From then on, the market value changes continuously but the book value which is recorded at historical cost tends to only change due to retained profits.
(e) To buy all of the firm's shares, generally a price close to the market value of equity will have to be paid.
Copyright © 2014 Keith Woodward