Asked by Tamera Inyang on Jun 28, 2024
Verified
All other things the same, if the company purchases equipment on credit, this transaction would have no impact on the company's book value per share.
Book Value Per Share
A financial measure that represents a per share assessment of the minimum value of a company's equity.
Equipment On Credit
The acquisition of machinery or equipment for business operations where payment is made through financing or on a deferred payment plan instead of upfront cash.
- Acquire knowledge on the consequences of shifts in a business's funding configuration on profitability and leverage figures, such as return on assets, debt-to-equity ratio, and book value per share.
Verified Answer
JM
Joshua MinkutuJun 30, 2024
Final Answer :
True
Explanation :
Purchasing equipment on credit does not affect the company's book value per share, as book value per share is calculated by subtracting total liabilities from total assets and then dividing by the number of outstanding shares. The equipment purchased would increase the total assets, but the corresponding increase in liabilities (due to the credit purchase) would cancel out the effect on book value per share.
Learning Objectives
- Acquire knowledge on the consequences of shifts in a business's funding configuration on profitability and leverage figures, such as return on assets, debt-to-equity ratio, and book value per share.