Book Value Per Sahre
-
Upload
university-of-st-la-salle-bacolod-baba -
Category
Business
-
view
1.970 -
download
0
Transcript of Book Value Per Sahre
Book Value Per Share
BABA 11
ACC104A_A
What?
Amount paid to each share if• Company is liquidated
• Total SHE reported is available for distribution
Formula
• Total stockholders’ equity
• Divided by
• Number of shares outstanding**assuming only one class of shares
Procedures 2 or more classes
• Allocate par/stated value to each class• Computation to determine number of
shares outstanding and aggregate par/stated value per share
Procedures
• Excess over par value = Retained earnings + Share premium + Revaluation surplus• Adjust excess over par for “retirement” of
treasury shares (see next slide)
“Retired” treasury shares
• If retired at a gain• CR to Share Premium
• If retired at a loss• Debit first to Share Premium• Excess is debited to Retained earnings
• Distribute preference dividends per its features• Ordinary shares = residual shares unless
preference dividends are participating
• Divide the total apportioned to each class by the number of shares outstanding in each class
• = Book value per share
Share capital outstanding
• Issued plus• Subscribed• Ignore subscriptions receivable
• Minus Treasury at par• Share capital outstanding • Number of shares and aggregate amountback
Preference Shares
• Preference as to assets• Preference as to dividends• Cumulative or non-cumulative• Participating or non-participating
Features of Preference Shares
• Preference as to assets• Liquidation value + dividends in arrears
(DIA)
• Preference as to dividends• Receives dividends before ordinary shares
IF dividends are declared
Features
• Shares may either be preference as to assets OR preference as to dividends but not both
• If silent, then preference as to dividends
Preferred as to assets
• Entitled to all dividends in arrears even if there is a deficit.
• Features like cumulative or non-cumulative apply only to preferred as to dividends.
Preference as to dividends
• No absolute right to dividends• Gets dividends only if declared• No declaration if deficit
Noncumulative PS
• Gets only current year dividends, whether or not declared
• Past dividends are forfeited if not declared
Cumulative PS
• Entitled to all dividends in arrears (i.e., undeclared dividends accumulate until paid)
Example Prob. 13-3, p.707 (2009)
• Deficit• Compute BVPS when• Preference as to assets• Preference as to dividends
Nonparticipating
• Entitled only to fixed preference rate
Participating PS
• Entitled to receive dividends in excess of fixed rate
• Fully participating• Participating only to a certain amount of
percentage
Participating PS
• Before PS can participate, OS receives amount equal to basic preference rate• OS outstanding x Preference rate• Use lower rate (2 or more PS)• Use rate of participating PS
Assumptions
• Preference shares* • *Unless otherwise stated
• Preference as to dividends• Noncumulative• Nonparticipating
We are what we repeatedly do.
Excellence, then, is not an act but a habit.
Aristotle