UNIT 10

10-1 Review questions

1. What is the significance of book value per share?

Book value per share is the portion of the total stockholders equity
assigned to each ordinary outstanding share. For investment purposes,
the book value per share is useful in relation to market value per share
to evaluate the attractiveness of the equity shares.

2. Basic formula in computing

Book value per share = total shareholders equity (SHE)
Number of ordinary shares outstanding
3. No. We do not compute book value per share for preference shares. Where
there are two classes of share capital (preference and ordinary), the equity of
preference shares is first deducted as follows:
Total shareholders equity Pxxx
Less: Equity of preference shares xxx
------
Ordinary shares equity Pxxx
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4. Earnings per share (EPS) is the amount of earnings attributable to each
ordinary share. It provides a measure of the interests of each ordinary share
in the performance of the entity over the reporting period.
5. EPS = Net income after tax / Average outstanding ordinary shares
6. The EPS is not computed for preference shares because EPS pertains more to
ordinary shares since preference shares earn a fixed rate of return on their
par value.

10-2 TRUE OR FALSE.

1. False
2. True
3. False. SHE / ordinary shares outstanding
4. True
5. False. Only EPS
6. False
7. False. Ordinary shares outstanding as at balance sheet date.
8. False. Only publicly held entities are required.
9. False. A measure of companys performance expressed on a per share basis.
10.False. A measure of companys financial position expressed on a per share
basis.

10-3 Computation of Book value per share (BVS).

1. SHE = 2,500,000 + 500,000 + 750,000 + 250,000 = 4,000,000

2. OUTSTANDING SHARES = 2,500,000/100 = 25,000
 3. Book value per share = 4,000,000 / 25,000 = P160.00
4. Yes. Because BVS is higher than par by 60%.

10-4 computation of BVS

1. SHE = 750,000 + 35,000 + 25,000 + 285,000 -15,000 = P1,080,000

2. OUTSTANDING SHARES = 15,000 250 = 14,850 SHARES
3. BV = 1,080,000 / 14,850 = P72.73
4. Yes. Because BVS is higher than par by 45%.