--%>
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 : How does preemptive right secure

    How does a preemptive right secure the interests of present stockholders? A preemptive right secure the interests of existing stockholders through giving them the chance to preempt other investors into the purchase of new shares. If these right

    		•
  • Q : Define the term Surplus Define the term

    Define the term Surplus: It is an outdated term for a fund’s excess of assets (or resources) over liabilities.

    		•
  • Q : What is Personal Services Personal

    Personal Services: It is a category of expenditure that comprises such objects of expenditures as the payment of wages and salaries of state employees and employee advantages, comprising the state's contribution to the Public Employees' Retirement Fun

    		•
  • Q : Production possibilities curve based

    Given is a production possibilities table for consumer goods (automobiles) and capital goods (forklifts): Illustrates these data graphica

    		•
  • Q : Private closed economy based question

    Normal 0 false false

    		•
  • Q : Describe the role of cash and of

    Describe the role of cash and of earnings while a corporation is deciding how much, if any, cash dividends to pay to common stockholders. In the long-run earnings are essential to maintain dividend payments; however at the time an actual dividen

    		•
  • Q : What are Summary Schedules Summary

    Summary Schedules: Different schedules in the Governor’s Budget Summary that summarize state revenues, expenditures and other fiscal and personnel data for the past, present, and budget years.

    		•
  • Q : Free-rider problem Normal 0 false false

    Normal 0 false false

    		•
  • Q : Effect of change on equilibrium

    Normal 0 false false

  • Q : Why too little debt is as unwanted as

    If an optimal capital structure exists, describe reasons why too little debt is as unwanted as is too much debt? Too little debt may be as unwanted as too much debt since if a firm contains a very conservative capital structures it may be losing

    		•