the value of the common stock in BS is $250m, and the market capitalization in the income statement is $2000m
Ain’t these two numbers supposed the same? Why is there such a big difference? From memory, EV = market cap (aka equity) + MV of debt - cash.
it’s a shame but I forgot what is the difference between total equity, common stock on the BS and the market cap (no. of share x share price ) on the income statement, I thought they are all suppose to be the same.
First, there is no market cap on the income statement.
Second, the market cap is the market value of the common stock outstanding, which is not necessarily the same as the book value of common stock outstanding, nor the book value of equity.
Third, par value of a common stock is an arbitrary number assigned by the issuing company, and is used to distinguish between the Common Stock account and the Contributed Capital in Excess of Par account on the balance sheet. It’s pretty much a meaningless number. Many companies issue no-par common stock; i.e., the stock doesn’t have a par value.
Fourth, preferred stock also has a par value, and that’s a meaningful number, for the preferred dividends are calculated as a percentage of that number, and the payoff to preferred shareholders on dissolution of the company is based on that number.
the share price and the number of shares are both in the IS. just multiple them to get the market cap, in the FMVA course, that’s how they got the market cap of $2,000 M