A Public Company Has a Book Value of $128 Million

question 29

Multiple Choice

A public company has a book value of $128 million. They have 20 million shares outstanding, with a market price of $4 per share. Which of the following statements is true regarding this company?

• A) The value of the firm's assets are greater than their liquidation value.
• B) The firm's market value is more than its book value.
• C) Investors believe the company's assets are not likely to be profitable as its market value is worth less than its book value.
• D) Investors may consider this firm to be a growth company.

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Definitions:

Consolidated Financial Statements

Financial statements that aggregate all the financial information of a parent company and its subsidiaries into one document.

Parent Company

A company that controls or owns more than half of another company's voting stock, making the latter a subsidiary.

Financial Statements

These are formal records of the financial activities and position of a business, person, or other entity, presenting the results of operations and financial condition.

Journal Entry

A record in the books of accounts that documents a business transaction.