The book value of a firm's equity is determined by:

Question

Quizplus · Accepted Answer

The book value of a firm's equity is determined by subtracting the total liabilities from the total assets. This is because the book value of equity represents the residual claim of the owners of the firm after all its liabilities are settled. Therefore, the correct option is C, which states that the book value of equity is the difference between the book values of assets and liabilities. The other options, A and B, are incorrect as they simply multiply the share price by the shares outstanding, which may not reflect the actual book value of equity. Option D is also incorrect as it mentions market values, which are not used to calculate book value.

The Book Value of a Firm's Equity Is Determined By