Book Value Per Share Of Common Stock
The book value per share is the minimum cash value of a company and its equity for common shareholders.
Book value per share of common stock. Investors and stock owners use book value per share of common stock to show how much money their shares are worth on the books after all debt is paid off. Some stockholders have keen interest in knowing the book value of the shares they own. To find the equity you should subtract the company s liabilities from its assets.
This amount applies if a company disbands and liquidates its assets and uses the assets pay off liabilities the remaining amount goes to the common shareholders. The book value per share of common stock is calculated by dividing by the number of shares outstanding. Book value per share of common stock is the amount of net assets that each share of common stock represents.
Dividing that 1 billion by the 100 million outstanding shares gives us a per share book value of 10. If the value of bvps exceeds the market value per share the. 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.
The formula for book value per share requires three variables. The calculation of its book value per share is. Finally we divide the current share price of 15 by that 10 to reach a price to book.
This article is focused on its calculation. The formula for calculating the book value per share of common stock is. The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding.
Book value per share stockholder s equity total number of outstanding common stock for example if there are 10 000 outstanding common shares of a company and each share has a par value of 10 then the value of outstanding share amounts to 100 000. Total equity preferred equity and total outstanding shares. 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.