Question

The book value of equity in a business will grow when: I. a company generates interest...

The book value of equity in a business will grow when: I. a company generates interest income II. a company issues less dividends than net income during the period III. a company generates more cash sales than credit sales I only II only III only I and II only I, II, and III

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Answer #1

Book Value of Equity refers to the value of equity as appearing in the books of accounts and includes value to stock issued, profits earned etc.

Therefore, The book value of the equity will increase when the company generates interest income, Also, when company issues less dividend than the net income since the remaining amount will go to Equity Shareholders funds. However, credit and cash sales will have no effect on the value of equity

Hence the answer is I and II only.

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