A change in investors’ expectations can impact a company’s market value.
Management can directly influence the book value of a company but not
the market value. A decrease in book value will not necessarily cause the
market value to decrease.
Equity Investments MCQ - Equity Investments Section 2
Book value = Total assets – Total liabilities = $24,000,000 - $10,500,000
= $13,500,000.
An increase in net income at a slower rate than shareholders’ equity will cause
the ROE to decrease as denominator increases faster than the numerator.
