Question

Which of the following statements is CORRECT regarding shareholder's equity and shareholder's value ? A. When the company's stock price goes up , shareholder's equity goes up. O B. Holding other things constant an increase in the company's total assets will lead to a decrease in shareholder's equity . C. Shareholder's value will decrease when shareholder's equity decreases . O When the company's stock price goes up, shareholder's value goes up.

Answer 1

Answer is Last option D – When the company’s stock goes up, the shareholder’s value goes up

When the company’s stock goes up, the shareholder’s value will also go up. Stock price going up does not impact the shareholder’s equity. Increase in total assets may not mean decrease in shareholder equity. The shareholder equity can go up due to increases in net profits. Shareholders’ value is impacted by the company’s stock price and not shareholders’ equity balance. So answer is last option D