Net Book Value Ratio Formula
Book value of equity formula it is calculated by adding the owner s capital contribution treasury shares retained earnings and accumulated other incomes.
Net book value ratio formula. How to calculate net book value let s say abc trucking company purchases a semi truck for 100 000 and it has depreciated 7 000 each year for five years. Nbv 100 000 7 000 x 5 years 65 000. Formula and calculation of p b ratio in this equation book value per share is calculated as follows.
How is net book value calculated. The ratios use the net book value of an asset to determine the market return of the company and the market price of the stock. The market to book formula is.
Here s the formula of price to book value price to book value ratio market price per share book value per share. 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. Book value formula calculates the net asset of the company derived by total of assets minus the total liabilities.
Mathematically it is represented as book value of equity formula owner s contribution treasury shares retained earnings accumulated other incomes. It is as good as the net asset value of a company which can be easily ascertained by taking all the assets less depreciation and liabilities. It also helps in calculating the different financial ratio.
This means the net book value of the truck would be 65 000 after five years. Market value per share is. Alternatively book value can be calculated as the sum total of the overall shareholder equity of the company.
Total assets total liabilities number of shares outstanding. The company valuation is based on the net book value of its assets at the time of the liquidation. The market to book value ratio can simply be calculated by using the following formula.