Book value per ordinary share is computed by:
A) Multiplying the number of ordinary shares outstanding times the market price per common share.
B) Dividing total assets by the number of shares outstanding.
C) Dividing shareholders' equity applicable to ordinary shares by the number of ordinary shares outstanding.
D) Multiplying the number of ordinary shares outstanding by par value per share.
E) Dividing the number of ordinary shares outstanding by shareholders' equity applicable to ordinary shares.

Question

Quizplus · Accepted Answer

Book value per ordinary share is calculated by dividing shareholders' equity applicable to ordinary shares by the number of ordinary shares outstanding. This provides the amount of equity that each shareholder would receive if the company were to be liquidated. A is incorrect because the market price per common share is not used in the calculation of book value. B is incorrect because total assets include both equity and liabilities, and dividing this by the number of shares outstanding would not provide an accurate measure of book value. D is incorrect because multiplying the number of ordinary shares outstanding by par value per share provides the total amount of share capital, not book value. E is incorrect because dividing the number of ordinary shares outstanding by shareholders' equity applicable to ordinary shares would provide the inverse of book value per share.

Book Value Per Ordinary Share Is Computed By