--%>
Assignment Help - homework help

Compare and contrast the book value and liquidation value

Compare and contrast the book value & liquidation value per share for common stock. Is one method more reliable? Describe.
The Book Value of a firm's common stock is found by subtracting the value of the firm's liabilities, and preferred stock, if any, as recorded onto the balance sheet, from the value of its assets. The result is the book value or overall worth of the company's common stock. In order to find the book value per share of common stock, divide the company's book value through the number of dazzling common stock shares.
The liquidation value and book value valuation methods are same, except that the liquidation method employs the market values of the assets and liabilities, not book values. The market values of the assets are the amounts the assets would earn on the open market if they were sold (or liquidated). The market values of liabilities are the amounts of money it would take to pay off the liabilities.
As it is depend on market values, the liquidation value method is more reliable than the book value method. Though, liquidation value is a worst-case valuation assessment. A company's common stock must be worth at least the amount generated per share at liquidation.

   Related Questions in Finance Basics

  • Q : Define Trigger Trigger : An event which

    Trigger: An event which causes an action or actions. The triggers can be active (like pressing the update key to validate input to a database) or passive (like a tickler file to repeat of an activity). For illustration, budget "trigger" mechanisms hav

    		•
  • Q : Explain Budget Cycle Budget Cycle : The

    Budget Cycle: The time period needed to made a state financial plan and enacts that part of it applying to the budget year. The Significant events in the cycle comprise: • The preparation of G

    		•
  • Q : Governments fiscal policy options for

    Normal 0 false false

  • Q : Describe the equilibrium price and

    Assume the total demand for wheat and the net supply of wheat per month in the Kansas City grain market are as: 16_Table for wheat.png

    		•
  • Q : Demand for French euros or a supply of

    Normal 0 false false

    		•
  • Q : Define Augmentation Augmentation : An

    Augmentation: An authorized raise to a formerly authorized appropriation or allotment. This augment can be authorized by the Budget Act provisional language, control sections, or other legislation. Generally a Budget Revision or an Ex

    		•
  • Q : What is Change Book System Change Book

    Change Book System: The system the Department of Finance employs to record all the legislative modifications (comprising changes stated by the Administration and approved by the Legislature) made to the Governor's Budget and the last actions on the bu

    		•
  • Q : Explain Detailed Budget Adjustments

    Detailed Budget Adjustments: Department Detailed Budget Adjustments are comprised in department budget displays to give the reader a snapshot of proposed expenses and position adjustments in the department, why tho

    		•
  • Q : Supply of automobile tires Normal 0

    Normal 0 false false

    		•
  • Q : Pros and cons of commercial paper

    Describe pros and cons of commercial paper associated to bank loans for a company seeking short-term financing? Usually commercial paper is a cheaper source of short-term financing for a firm, compared to bank loans. Also, a larger amount of fu

    		•