The book value per share is obtained by dividing?

A. shareholders equity by outstanding shares
B. total assets by outstanding shares
C. gross profit by outstanding shares
D. net profit by outstanding shares

Correct Answer:

Option A – shareholders equity by outstanding shares

Explanation

To calculate the book value per share, you must first calculate the book value, then divide by the number of common shares. Also, since you’re working with common shares, you must subtract the preferred shareholder equity from the total equity. Hence we have;

Book Value per Share = (Shareholders’ Equity – Preferred Equity) / Total Outstanding Common Shares.