When a Company Has Both Common Stock and Preferred Stock

question 48

Multiple Choice

When a company has both common stock and preferred stock, the book value per share of common stock is calculated by:

• A)dividing the amount in the common stock account by the number of shares of common stock outstanding.
• B)dividing total stockholders' equity less preferred equity by the number of shares of common stock outstanding.
• C)dividing the amount in the common stock account by the sum of the number of shares of common stock and preferred stock outstanding.
• D)dividing total stockholders' equity by the number of shares of common stock outstanding.

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Definitions:

Noncontrolling Interest

An ownership interest in a company that is less than 50%, indicating that the holder does not have control over the company's operations.

Book Value

The net value of a company's assets minus its liabilities and intangible assets, often used to estimate a company's net worth.

Controlling Interest

The ownership of a sufficient portion of a company's stock to influence its direction, typically through more than 50% of voting shares.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs from total revenue.