--%>
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 : Explain primary assumption behind

    Explain primary assumption behind the experience approach to forecasting?The experience approach to forecasting is depending on the supposition that things will happen a certain way in the future since they happened that way in the past. For exa

    		•
  • Q : Estimation of expected incremental cash

    How do we estimate expected incremental cash flows for proposed capital budgeting project? We estimate expected incremental cash flows for proposed project through estimating the changes in sales and expenses which are incremental to the project

    		•
  • Q : What is Financial Restructuring

    Financial Restructuring: It is the reorganizing of a business' liabilities and assets. The procedure is frequently related with corporate restructuring where an organization's on the whole structure and its processes are refurbished. Though companies

    		•
  • Q : What is Non-governmental Cost Funds

    Nongovernmental Cost Funds: For lawful basis purposes, employed to budget and account for revenues other than common and special taxes, licenses, and fees or some other state revenues.

    		•
  • Q : Demand for small automobiles Normal 0

    Normal 0 false false

  • Q : How long do business cycles remain

    Normal 0 false false

  • Q : Domestic opportunity cost of production

    Hypothetical production possibilities tables for New Zealand and Spain are given below 639_Hypothetical production possibilities.png

    Q : Primary requirement for JIT inventory

    Describe the primary requirements for a successful JIT inventory control system? For a JIT system to be successful the supplier has to be willing and capable to deliver materials immediately and the quality of delivered materials has to be high.

    		•
  • Q : Health finance 7.2 The audiology

    7.2 The audiology department at Randall Clinic offers many services to the clinic's patients. The three most common, along with cost and utilization data, are as follows: Service Variable Cost Annual Direct Annual # Visits per Service Fixed Costs Basic exam $5 $50,000 3,000 Advanced examination $7 $

    		•
  • Q : Why coefficient of variation is better

    Why is the coefficient of variation frequently a better risk measure while comparing different projects than the standard deviation?Whenever we desire to compare the risk of investments which have different means, we employ the coefficient of va

    		•