Certified Management Accountant Practice Exam 2025 – The Comprehensive All-in-One Guide to Exam Success!

The book value per share is accurately calculated using the formula that divides total stockholders' equity by the number of common shares outstanding. This measure reflects the value available to each shareholder in the event the company were to liquidate its assets and settle its liabilities. By focusing on stockholders' equity, which represents the residual interest in the assets of the company after deducting liabilities, this calculation provides a clear view of what each share of stock is worth from an accounting perspective.

The number of common shares outstanding is critical in this formula since it determines how that equity is divided among shareholders. It ensures that equity ownership is reflected on a per-share basis, giving a tangible value to each share in the market.

In contrast, the other formulas presented don't accurately reflect the book value per share. For instance, looking at total stockholders' equity divided by total assets does not provide insight into the value assigned to each share, as it focuses on the relationship between equity and the total asset base rather than specifically to shares outstanding. Similarly, dividing total liabilities by the number of shares issued does not relate to book value per share as it incorrectly focuses on liabilities instead of the equity perspective. Lastly, using total equity over the number of preferred shares outstanding would pertain specifically