Question

How does the book value of shares of stock differ from the market value of shares of stock? Use a real-world example in your answer.

Answer 1

Answer:

The book value of the stock can be calculated by taking the difference of assets and liabilities and then dividing the answer by the number of shares. The result will be the book value of a unit stock. Whereas the market value of the share is different because the stock market valuates the stock which is dependent on its assets, return, riskiness of the industry, social responsibility, etc. So these factors helps companies like S & P global, Dow's plc, etc to value stocks and publish the credit ratings of companies in stock exchange.

Explanation:

The market value of Home Depot is $243 in the stock exchange but the equity book value of is at deficit which is -$1878 millions. Dividing it by number of shares we have -29 ($1878 millions / 6,3.8 million shares). The book value of the company is negative but still the company has a great number of profits for the year and the company is worth $300 billions.