CS Executive · Corporate Accounting and Financial Management · Introduction to Financial Management
Aarav Pvt. Ltd. has 4,00,000 equity shares. Its market price per share is ₹75 and its net worth is ₹2,00,00,000 including all reserves. The company's total market capitalisation is:
Market capitalisation is ₹3,00,00,000, found by multiplying 4,00,000 shares by the market price of ₹75. Net worth of ₹2,00,00,000 is a book value figure and does not measure the market value of equity that shareholder wealth is judged by.
- A₹2,00,00,000
- B₹3,00,00,000Correct
- C₹1,50,00,000
- D₹5,00,00,000
Explanation
Market capitalisation equals number of shares times market price: 4,00,000 × 75 = ₹3,00,00,000. The ₹2,00,00,000 figure is net worth (book value), which is the wrong base. Checking, 3,00,00,000 / 4,00,000 = ₹75.
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