Question

If a company's price per book value falls below 1, why wouldn't investors benefit more if...

If a company's price per book value falls below 1, why wouldn't investors benefit more if the company simply liquidate its assets and declares bankruptcy?

Homework Answers

Answer #1

Company's price per book value signifies market price of the shares of the company per book value of share price of the company..

If , the PBV ie price per book value falls bellow 1 ie decreasing price of the company;s asset.

Price ie market price less than 1 signifies undervalued stock which in turn signifies that the investment done by the shareholder in the company is bad.So,if the company sells the assets whose price decreased the shareholder would get less amount and will leads to a loss on the part of the shareholders.

Therefore the investors would not benefit from liquidation of the assets.

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