Practice Quiz

CLEP Accounting

Category - Accounting

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Which of the following is true regarding the difference between book value and shareholder’s equity?
  1. There is no difference; these terms are synonymous.
  2. Book value excludes intangibles such as goodwill.
  3. Shareholder’s equity measures net assets.
  4. Shareholder’s equity is an asset; book value is a liability.
  5. Book value is an asset; shareholder’s equity is a liability.
Explanation
Answer - B - Book value differs from shareholder’s equity in that book value excludes intangibles, such as goodwill.

Key Takeaway: Shareholder’s equity is Total Assets − Total Liabilities. Book value is the net tangible assets of a corporation and does not include items such as goodwill, patents, etc., that are considered intangible. The terms are not synonymous.
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