Gearing Book Value Formula

Book value per share.

Gearing book value formula. Where d is the total debt i e. Another alternative is to monitor the gearing ratio which is calculated by dividing net debt by the total of net debt and adjusted equity. 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.

Classification of debt and equity. Total debt book value of equity. Book value may also be.

Long term debt short term debt bank overdrafts shareholders equity. The formula is. Appropriate classification of capital into debt and equity is important for the calculation of the gearing ratio.

It uses the book value of equity not market value as it indicates what proportion of equity and debt the company has been using to finance its assets. The most comprehensive form of gearing ratio is one where all forms of debt long term short term and even overdrafts are divided by shareholders equity. For the purpose of analysis the book value of equity is further divided by a total number of shares to make book value per share.

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 gearing ratio calculated by dividing total debt by total capital which equals total debt plus shareholders equity is also called debt to capital ratio. The sum of interest bearing long term and short term debt such as bonds bank loans etc.

How to calculate book value. Also known as gearing this is a measure of a company s financial leverage calculated by dividing its total liabilities by stockholders equity. The 1 st part will be to find out the equity which is available to its common shareholders.