Book Value Per Share From Balance Sheet

Understanding book value per share.

Book value per share from balance sheet. With reference to the balance sheet above for xyz corporation let s assume that the current market price of the stock is 70 and book value per share is calculated as 10 then price to book value will be equal to 7. Return per share stable return on equity cost of equity book value of equity per. Market price of a stock is different from it s book value.

Book value per share is a ratio that compares the net asset value of a company minus preferred equity to the total number of common shares available on the market. The information needed to calculate bvps is found on a company s balance sheet. Divide the firm s total common stockholder s equity by the average number of common shares outstanding.

The price to book ratio p b is one way to evaluate a stock s value something that may be important if you re looking. For example if the firm s total common stockholder s equity is 6 3 million and the average number of common shares outstanding is 100 000 then the stock price s book value for the firm would be 63. Book value is the net value of a firm s assets found on its balance sheet and it is roughly equal to the total amount all shareholders would get if they liquidated the company.

For example enterprise value would look at the market value of the company s equity plus its debt whereas book value per share only looks at the equity on the balance sheet. This means book value per share of common stock is the amount of money each share would receive based on the balance sheet if the company is liquidated today. Calculate the firm s stock price book value from the balance sheet.

When calculating the book value per share of a company we base the calculation on the common stockholders equity stockholders equity stockholders equity also known as shareholders equity is an account on a company s balance sheet that consists of share capital plus and the preferred stock should be excluded from the value of equity. Investors looking to apply book value per share to a stock should look at a firm s balance sheet which will include the necessary ingredients to ascertain book value such as total asset value. Comparing bvps to a stock s market price could help value investors find opportunities.

The second way is to divide company s current stock price with its 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.