Book Value Per Share May Not Approximate Market Value Per

question 29

Multiple Choice

Book value per share may not approximate market value per share because:

• A) Land may have substantially increased in value.
• B) Market value reflects future potential earning power.
• C) Investments may have a market value substantially above the original cost.
• D) All of these are reasons why book value per share may not approximate market value per share.

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Definitions:

Costs

The expense incurred in the production of goods or services or in the undertaking of any activity.

Price-Taker Firm

A company that must accept the prevailing prices in the market of its products because its own activity does not affect market prices.

Short-Run Losses

Financial deficits that occur within a brief period and are typically seen as part of the normal business cycle or due to temporary challenges.

Fixed Cost

Expenses that do not change with the level of production or output within a certain range or period.