Statement Presentation of Shareholders
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Share capital Æ consists of preferred and common shares.
Additional contributed capital Æ the amounts paid over stated (or par) value. This category
will result only if stated (or par) values exist.
Using the Information in the Financial Statements
¾ Return on EquityPHDVXUHVDILUP¶VSURILWDELOLW\DQGHIILFLHQF\1HWLQFRPHQHW
¾ Book Value Per Share: represents the equity a common shareholder has in the net
book value per share. When a company has both preferred and common shares, the
calculation of book value for the common shareholders is more complex. Since
preferred shareholders have priority, their equity must be deducted first. The
calculation of book value per common share involves the following steps: calculate
determine book value per common share.
¾ Book Value versus Market Value: book value per share seldom, if ever, equals
market value. Book value is based on recorded historical costs. Market value reflects
potential for future earnings and dividends.
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