Formula For Calculating Book Value Ratio
For calculating book values for the purpose of deriving this ratio an investor can use the following.
Formula for calculating book value ratio. It compares the market value of a company to the book value of each of its shares. The formula for calculating the book value per share is given as follows. Definition what is price to book value ratio.
How to calculate the book values and market values for the formula. Formula to calculate price to book value. The price to book p b value ratio is an important measure that is used to value a company s stock.
Either of the above formula can be used for calculating the ratio. B p p s t n where. Formula for book value per share.
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. We used the average number of shares outstanding because the closing period amount may skew results if there was a stock issuance or major stock buyouts. The formula states that the numerator part is what the firm receives by the issuance of common equity and that figure increases or decreases depending upon the company is making profit or loss and then finally it decreases by issuing dividend and preference stock.
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 1 st part will be to find out the equity which is available to its common shareholders. The price to book value ratio p b formula is also referred to as a market to book ratio and measures the proportion between the market price for a share and the book value per share.
The formula for calculating book value. The book value of that company would be calculated. Example of how to use the p b ratio.