Book Value And Market Value Of Equity

Book value is the actual worth of an asset of the company whereas market value is just a projected value of the firm s or asset s worth in the market.

Book value and market value of equity. As a result the book value equals the difference between a company s total assets and total liabilities. As such book value only looks at the company s past while market value should be based on the company s future. The price to book p b ratio is a popular way to compare market value and book value.

If a company has a high price to book ratio market price per share divided by book value of equity per share relative to its industry peers the market likely has high growth expectations for the company. Book value is also recorded as shareholders equity. The book value of equity is equal to total assets minus total liabilities preferred stocks and intangible assets.

Book value of equity represents the fund that belongs to the equity shareholders and is available for the distribution to the shareholders and it is calculated as the net amount remaining after the deduction of all the liabilities of the company from its total assets. Book value is equal to the value of the firm s equity while market value indicates the current market value of any firm or any asset. The market value of equity is very different from the book value of equity.

Book value of equity also known as shareholder s equity is a firm s common equity that represents the amount available for distribution to shareholders. Face value is the value of a company listed in its books of the company and share certificate. And finally the book value of a company is the total value of the company s assets that shareholders will receive in case the company gets liquidated.

Book value of equity of any company is calculated from its financial statements whereas its market value of equity is calculated from the market price of each share. Book value changes annually but market value changes every next moment. What is book value of equity.

For example a company has a p b of. Book value is equal to the value of the firm s equity. Market value per share is the current value at which the stock is trading in the market.