Book Value And Market Value Of Equity
Face value is the value of a company listed in its books of the company and share certificate.
Book value and market value of equity. Book value is the actual worth of an asset of the company whereas market value is just a projected value of the firm s or asset s worth in the market. Book value changes annually but market value changes every next moment. The market value of equity is very different from the book value of equity.
As such book value only looks at the company s past while market value should be based on the company s future. Book value of equity total assets total liabilities. It is equal to the price per share divided by the book value per share.
And finally the book value of a company is the total value of the company s assets that shareholders will receive in case the company gets liquidated. Book value is equal to the value of the firm s equity while market value indicates the current market value of any firm or any asset. An investor can calculate the book value of an asset when the company reports its earnings on a quarterly basis whereas market value changes every single moment.
Book value is also recorded as shareholders equity. What is book value of equity. Book value of equity also known as shareholder s equity is a firm s common equity that represents the amount available for distribution to shareholders.
Book value of equity of any company is calculated from its financial statements whereas its market value of equity is calculated from the market price of each share. Book value is equal to the value of the firm s equity. Market value per share is the current value at which the stock is trading in the market.
If a company has a high price to book ratio market price per share divided by book value of equity per share relative to its industry peers the market likely has high growth expectations for the company. As a result the book value equals the difference between a company s total assets and total liabilities. For example a company has a p b of.