(CMA adapted, Jun 96 #18) The book value per share calculation of a corporation is usually significantly different from the market value of the stock's selling price due to the
A)use of accrual accounting in preparing financial statements.
B)use of the matching principle in preparing financial statements.
C)omission of the number of preferred shares outstanding at year end in the calculation.
D)use of historical costs in preparing financial statements.
E)none of the above.

Question

Quizplus · Accepted Answer

Book value per share is calculated using historical costs, which do not necessarily reflect the current market value of assets. Market value is influenced by supply and demand factors, investor sentiment, economic conditions, and many other variables. The use of accrual accounting and the matching principle, as well as the omission of preferred shares, may affect the overall financial statements, but they are not the primary factors that cause the difference between book value and market value per share.

(CMA Adapted, Jun 96 #18) the Book Value Per Share