If the stock price of a company reduces, how is balance sheet calculated?



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If my stock prices are falling that means I am incurring loss from that part or if I sell them I will make a loss,In turn it will reduce my current asset and indeed the Netwoth on that specific day.Then why "Current Asset" or "Net Worth"is a wrong ans for the question "If the stock price of a company reduces, which of the following items in the balance sheet is affected?"

2 Answer(s)


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Ayan, The "stock price" the question refers to is the company's own stock price as given by the stock market. That has no impact on the balance sheet since balance sheet only reflects book value of its stocks and not market value. This kind of stock is present in the Shareholder Equity account of the balance sheet.

The "stock price" of the "stocks" in the current assets is not the price of the companys own stock. It is the price of the stock the company owns in other companies as investments.

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Yes, I agree with Binny, Stock market price affect only company's market value means company market capitalisation not it stock book value. Because stock get on nominal value in balance sheet.

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