What Is the Current Price of a Share of Stock

question 100

Multiple Choice

What is the current price of a share of stock for a firm with $5 million in balance-sheet equity, 500,000 shares of stock outstanding, and a price/book value ratio of 4?

• A)$2.50
• B)$10.00
• C)$20.00
• D)$40.00 book value per share = $5,000,000/500,000 = $10
• If price/book value = 4

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Definitions:

Deferred Tax Liability

It's a tax obligation that arises from income already earned and recorded for accounting purposes, but payment is deferred to the IRS until a future date.

Subsidiary

An entity that is controlled by a higher entity, usually through majority shareholding, and is included in the financial statements of the controlling entity through consolidation.

Investment

The allocation of resources, usually financial, in expectation of a future return or profit.

Equity

The value of an ownership interest in a company, represented by the portion of the company's assets that would be distributed to shareholders after settling all liabilities.