Ans. Book Value
The book value per share means the net worth of the company
i.e., paid equity share capital plus free reserves and surpluses divided by the
number of equity shares outstanding. For example, if the paid LIP capital of a
company is Rs. 50,00,000 and reserves Rs. 30,00,000 i.e., net worth Rs.
80,00,000. If the equity shares are 20,00,000, then the book value per share is
Rs. 80,00,000+20,00,000 = Rs. 4. Those who favour this approach say it is an
objective measure of value. But it suffers from a serious drawback. It is based
on historical balance sheet figures that are arrived at according to accounting
conventions and estimates of accountants are so not reliable.
Liquidation Value
Under this approach, it is assumed that if the company goes into liquidation how much amount its assets would realize on sale. The following formula is used to find the liquidation value per share
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