Book Value Formula Math

The formula for calculating book value per share is the total common stockholders equity less the preferred stock divided by the number of common shares of the company.

Book value formula math. The formula states that the numerator part is what the firm receives by the issuance of common equity and that figure increases or decreases depending upon the company is making profit or loss and then finally it decreases by issuing dividend and preference stock. Note that the book value of the asset can never dip below the salvage value even if the calculated expense that year is large enough to put it below this value. It is an estimate of what the asset is worth on the company s balance sheet but.

In the example above the asset s book value after 6 years would be 10 000 6000 or 4000. Book value and fair value are both used to place a value on an asset but the difference lies in the way that price is determined. The 1 st part will be to find out the equity which is available to its common shareholders.