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Unit 12: Valuation of Shares




               If the arrears of preference dividend are shown in the liability side of the balance sheet that   Notes
               is always subtracted from the net assets of the company and then value of each share is
               calculated.
          (iv)  When preference shares have no priority for payment of capital and dividend: It means
               preference shares and equity shares are of the same rank. If the paid up value of both type
               of the shares is the same, total net assets will be divided by the total number of equity
               and preferences shares to compute the value of each share. Here the value of equity and
               preference share will be same. If the paid up value of equity and preferences shares is not
               equal, first the total net assets of the company will be divided in the ratio of paid up capital
               of equity shares and preference shares. To ascertain the value of each share, each portion of
               the net assets will be divided by their respective number of shares.

          (v)   When preferences shares are participating: In this case, the entire net assets will be divided
               into  the  equity  shares  and  preference  shares  as  per  the  rights  given  in  the  Articles  of
               Association of the company. Then, each portion of the net assets will be divided by its
               respective number of shares in order to compute the value of share.

                       Format for Assets Valuation Method for Valuation of Shares
                                                                     `
             Asset at realisable value or market value
             Fixed Assets:

             Goodwill                                            x x x x
             Land & Buildings                                    x x x x
             Plant & machinery                                   x x x x
             Furniture                                           x x x x

             Investment:
             Quoted and Unquoted
             Current Assets:
             Stock                                               x x x x
             Debtors                                             x x x x
             Bills Receivable                                    x x x x

             Cash in hand                                        x x x x
             Cash at bank                                        x x x x


             Gross Realisable Value of the Assets                x x x x
             Less: External Liabilities:
             Creditors                                           x x x x

             Bill Payables                                       x x x x
             Amount Payable to Debenture-holders
             (including outstanding interest)                    x x x x
             Outstanding Liabilities for Expenses                x x x x       x x x x
                                                                                Contd...




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