CFA Level I · CFA Level I Exam · Equity Instrument Features
A company's book value of equity is most accurately described as:
Book value of equity is total assets minus total liabilities as recorded on the balance sheet. It differs from market value, which is share price multiplied by shares outstanding, and from intrinsic value, which is based on discounted expected future cash flows.
- Athe total assets minus total liabilities recorded on the balance sheetCorrect
- Bthe price at which its shares currently trade multiplied by shares outstanding
- Cthe present value of all expected future dividends to shareholders
Explanation
Book value of equity is the accounting figure equal to assets minus liabilities. Market value is share price times shares outstanding, and the present value of dividends is an intrinsic valuation concept.
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