Book Value Of Equity Vs Market Cap

Market value tends to be greater than a company s book.

Book value of equity vs market cap. We can also define in equation form. 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. Market capitalization is the total dollar value of all outstanding shares of a company.

An overview two of the most common ways of assessing a company s value are market capitalization and equity also known as shareholder equity. Book value of equity total assets total liabilities. 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.

Each term describes a different way of looking at a company s value. 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. Stockholders equity which is also known as book value is the accounting value of the claim.

Market capitalization or market cap is the market value of all of a company s common stock. Market value is the company s worth based on the total value of its outstanding shares in the market which is its market capitalization. It is helpful to consider both to get the most accurate picture of a company s worth.

The market value of equity is very different from the book value of equity. Equity value is not similar as market value and market cap because for reason of mergers and acquisitions market cap and market value is reflects only current outstanding shares but equity value is incorporated with all the equity ownership interests and the value of unexercised stock options in a firm. Market capitalization market price of share x number of common shares outstanding.

Now let s take an example. 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. For healthy companies equity value far exceeds book value as the market value of the company s shares appreciates over the years.