Book Value Per Share Explained

Nbv is calculated using the asset s original cost how much it cost to acquire the asset with the depreciation depletion or amortization. The term book value is a company s assets minus its liabilities and is sometimes referred to as stockholder s equity owner s equity shareholder s equity or simply equity. This video explains how to calculate the book value per share given shares outstanding and how to calculate the price to book ratio given the market capitali.

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Book value per share is a fairly conservative way to measure a stock s value.

Book value per share explained. Amortization amortization refers to the process of paying off a debt through scheduled pre determined. The book value per share bvps is a ratio that weighs stockholders total equity against the number of shares outstanding. For decades value investors have used book value per share as a tool to assess a stock s value potential.

Book value per common share or simply book value per share bvps is a method to calculate the per share book value of a company based on common shareholders equity in the company. The book value of a company stripped to basics is the value of the company the stockholders will own if the firm s. Learn more about how to calculate this ratio what it tells you and how investors use it to guide their decisions.

This approach began with benjamin graham. Be sure to use the average number of shares since the period end amount may incorporate a recent stock buyback or issuance which will skew the results. Net book value nbv refers to a company s assets or how the assets are recorded by the accountant.

The formula for book value per share is to subtract preferred stock from stockholders equity and divide by the average number of shares outstanding. In other words this measures a company s total assets minus its total liabilities on a per share basis. An asset s book value is equal to its carrying value on the balance sheet and companies.

It s calculated by dividing the company s stock price per share by its book value per share bvps. The book value per share formula is used to calculate the per share value of a company based on its equity available to common shareholders.