Book Value per Share Importance | CFA Level 1 Exam Prep

The Importance of Book Value per Share

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Why is book value per share important?

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Explanation

Book value per share is often times used by firms in determining merger terms. Book value per share plays an important role in the analysis of financial statements since one method of valuation begins with the book value per share figure, to which an estimate of future earnings is added. An estimate of the future profitability of a firm can be based directly on the earnings capacity of its asset base.