24. Calculate Book Value with Preferred Stock

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In this lesson, students learned the importance of Common Shareholder’s equity and Preferred Shareholder’s par value. In order to properly assess the value of a common shareholder’s equity we must always remember to subtract the par value of the preferred stock. Although this might be a painful process for new investors, it’s importance is paramount. If an individual is interested in investing in such a company, you would need to assess this “correct book value” for previous periods in order to reasonably assess the common share holder’s equity growth in a business.