Book Value Formula Math

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.

Book value formula math. To arrive at the book value simply subtract the depreciation to date from the cost. Book value is the carrying value of an asset which is its original cost minus depreciation amortization or impairment costs. The 1 st part will be to find out the equity which is available to its common shareholders.

Book value and fair value are both used to place a value on an asset but the difference lies in the way that price is determined. 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. In the example above the asset s book value after 6 years would be 10 000 6000 or 4000.