Book Value Of Equity Stock

From the perspective of an analyst or investor it is all the better if the balance sheet of the company is marked to market i e it captures the most current market value of the assets and the liabilities.

Book value of equity stock. This means if the company dissolves the shareholders will receive an amount per share as per book value per share. 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. What does book value of equity mean.

Book value per share represents equity of the firm on per share basis. Book value of equity per share effectively indicates a firm s net asset value total assets total liabilities on a per share basis. Book value 74 500 dividend arrears per share par value x dividend rate x number of years dividend arrears per share 100 00 x 6 x 2 12 00 book value per share call price dividend arrears book value per share 106 00 12 00 118 00 book value of preferred stock number of shares x book value per share book value of preferred stock 250 x 118 00 29 500 book value per share 29 500 250 118 00.

Market value and book value of equity are widely used by investors to value an asset class. The formula for book value per share book value of equity total number of outstanding shares. 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.

Put another way if a company were to close its doors sell its assets and pay off its debts the book value of equity is theoretically the amount that would remain to be divided up among the shareholders. Book value may also be. It is calculated by multiplying a company s share price by its number of shares outstanding whereas book value or shareholders equity is simply the difference between a company s assets and liabilities.

Comparing both for a company indicates whether the company is undervalued or overvalued. The book value of equity is equal to total assets minus total liabilities preferred stocks and intangible assets. For healthy companies equity value far exceeds book value as the market value of the company s shares appreciates over the years.

If the market value is less than the book value it implies the stock is trading at a discount and vice versa. Why book value is useful the primary advantage of using book. Defining book value of equity book value of equity is an estimate of the minimum shareholders equity of a company.