The market value of the ownership of the firm equals:
A)the market price of the stock times the number of shares outstanding.
B)the sum of the market price of the bonds and the stock.
C)the par value of the stock times the number of shares outstanding.
D)the market price of the stock minus the retained earnings.
E)None of the above.

Question

Quizplus · Accepted Answer

The market value of the ownership of the firm is represented by the market value of its stock, which is the product of the market price per share and the number of shares outstanding. Therefore, (A) is the correct choice. Bonds are not part of the ownership of the firm, and par value is a nominal value assigned to the stock and has no correlation with its market value. Retained earnings are part of the equity of the firm, but they are already included in the market price of the stock.

The Market Value of the Ownership of the Firm Equals