CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

An analyst gathers the following information about a company:

Common stock $1.50 par value
- Authorized: 5,000,000 shares
- Issued: 4,000,000 shares
Additional paid-in-capital: $20,000,000
Retained earnings: $5,000,000
Treasury stock (500,000 shares): $10,000,000
Current price per share: $21

The price-to-book (P/B) ratio of the company is closest to ______.
A. 2.35
B. 3.50
C. 4.10
Explanation: Number of issued and outstanding shares = 4 m - 0.5 m = 3.5 m; (Issued - Treasury Stock)
BV per share = 4m shares (1.50) + $20 m + $5 m - $10 m = $21 m / 3.5 m sh. = $6.00
Price-to-book value = $21 / $6.00 = 3.50

User Contributed Comments 3

User Comment
birdperson subtracting treasury stock on the BV(equity) got me..
jorellana9 same here
miszkam this makes more sense:
(21*3.5)/(4*1.5+20+5-10)=3.5
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