The relationship between book value and market price of capital stock is a measure of investors' confidence in a company's management.

Question

Quizplus · Accepted Answer

The book value represents the value of the company's assets minus any liabilities, while the market price represents the price at which the company's capital stock is traded in the financial markets. The relationship between these two values indicates the market's perception of the company's current and future performance. If the market price is higher than the book value, investors may be confident in the company's management and growth potential. However, if the market price is lower than the book value, investors may lack confidence in the company's management and future prospects.

The Relationship Between Book Value and Market Price of Capital