(Learning Objective 5: Measuring the book value per share of ordinary share)

The balance sheet of Eclectic Rug Company reported the following:

❙ Requirements 1. Compute the book value per share for the ordinary shares, assuming all preference dividends are fully paid up (none in arrears).

2. Compute the book value per share of the ordinary shares, assuming that three years’

cumulative preference dividends, including the current year, are in arrears.

3. Eclectic Rug’s ordinary shares recently traded at a market price of €7.10 per share. Does this mean that Eclectic Rug’s shares are a good buy at €7.10?