If a company has both common and preferred shares outstanding and wishes to calculate book value per share,
A)net assets must be divided by the total number of both classes of stock.
B)net assets,less the redemption value of the preferred stock,must be divided by the number of shares of common stock outstanding.
C)stockholders' equity must be divided by the total number of both classes of stock.
D)stockholders' equity,less the cost of treasury shares held,must be divided by the number of common shares outstanding.

Question

Quizplus · Accepted Answer

The book value per share is calculated by dividing net assets, less the redemption value of preferred stock, by the number of shares of common stock outstanding. This is because preferred stock is considered a liability and its redemption value must be subtracted from the net assets before dividing by the number of common shares outstanding.

If a Company Has Both Common and Preferred Shares Outstanding