The Book Value of a Share of a Company's Common

question 59

True/False

The book value of a share of a company's common stock indicates the dollar value of net assets a common shareholder would receive for each share after any preferred shareholders have received their share of the company's net assets.

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Definitions:

Operating Leverage

A financial ratio that measures the degree to which a firm or project can increase operating income by increasing revenue.

Operating Income

The income earned from a company's day-to-day operations, calculated before taking into account interest and taxes.

Margin Of Safety

The difference between actual sales and break-even sales, providing a cushion against which sales can fall before a business incurs a loss.

Break-Even Point

The level of sales or production at which total revenues equal total expenses, resulting in no profit or loss for the business.