Final answer:
The book value per share for a C Corporation that only issues common stock is calculated by dividing total stockholders' equity by the number of shares of common stock outstanding. This measure represents the amount shareholders would theoretically receive if all assets were liquidated and debts paid. It should not be confused with net income or preferred dividends, which are not used in this calculation.
Step-by-step explanation:
To calculate the book value per share of common stock for a C Corporation that only issues common stock, total stockholders' equity would be divided by the number of shares of common stock outstanding. The book value per share reflects the amount of money that would be returned to shareholders if all of the assets were liquidated and all of the company's debts were paid off. To find it, you can look at the company's balance sheet to determine the total equity, which includes common stock, retained earnings, and possibly additional paid-in capital, and deduct any preferred equity since the company only issues common stock.
Net income is not used to calculate book value, as it is an income statement figure that reflects the company's profitability over a period of time, rather than an indicator of the company's net assets' value. Preferred dividends in arrears and total assets are also not directly used in the calculation of book value per share for common stock. Instead, the focus is squarely on stockholders' equity, as this represents the ownership interest of the shareholders after all liabilities have been settled.
It's important to understand the concept of book value per share when assessing a company's financial health or considering an investment. It provides a measure of the value of the company's shares based on historic costs and accounting values, although it does not necessarily reflect current market value, which could be influenced by investor expectations, market conditions, and other factors such as the company's potential for future profitability and growth.