NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Stocks
In the context of equity share valuation, which of the following best describes the 'book value per share' of a company?
Book value per share is net worth, meaning share capital plus reserves, divided by the number of equity shares outstanding. It reflects accounting value per share, not market price, earnings per share or dividend yield, which use different numerators or denominators.
- ANet worth divided by the number of equity shares outstandingCorrect
- BMarket capitalisation divided by the number of equity shares outstanding
- CAnnual profit after tax divided by the number of equity shares outstanding
- DAnnual dividend paid divided by the market price per share
Explanation
Book value per share equals shareholders' net worth (equity share capital plus reserves) divided by the number of equity shares outstanding. Market capitalisation divided by shares gives market price, profit divided by shares gives EPS, and dividend divided by price gives dividend yield.
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