Book Value Calculation Formula

The formula for calculating book value.

Book value calculation formula. The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding. The image above represents book value. You can use this book value calculator.

B p p s t n where. To compute for book value four essential parameters are needed and these parameters are present amount or worth p salvage value s total estimated life of the asset n and number of years of the asset t. Roe is net income divided by stockholder s equity.

Therefore the calculation of book value per share will be as follows bvps total common shareholders equity preferred stock number of outstanding common shares 2 93 491 00 cr 592 18 cr. The formula is the company s assets minus liabilities intangible assets and the value of preferred stock. Note that the book value of the asset can never dip below the salvage value even if the calculated expense that year is large enough to put it below this value.

Book value per share is also used in the return on equity formula or roe formula when calculating on a per share basis. Net income on a per share basis is referred to as eps or earnings per share. In the example above the asset s book value after 6 years would be 10 000 6000 or 4000.

If the value of bvps exceeds the market value per share the. To arrive at the book value simply subtract the depreciation to date from the cost. The result tells you what the tangible worth equals after liabilities are subtracted from tangible assets.

A conservative approach to evaluating a company s worth is to calculate tangible book value also called net tangible assets. 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. As shown at the top of this page book value per share is expressing stockholder s equity on a per share basis.