Book Value Multiple Formula

If there are 10 million shares outstanding each share would represent 2 50 of book value.

Book value multiple formula. The influence of the return on equity and the cost of equity can be consolidated in one measure by taking the difference between the two a measure of excess equity return. If the value of bvps exceeds the market value per share the. When a comparison is performed to the company s market value or market price book value can be a good indicator to equity.

This illustrates that the market. The mb multiple will be higher than 1 if a company delivers roe higher than the cost of equity r. First we require citigroup s balance sheet details.

The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding. Book value may also be. As the accounting value of a company book value can have two core uses.

If the share price is 5 then the p b ratio would be 2x 5 2 50. P b ratio formula market price per share book value per share. Let us now apply price to book value formula to calculate citigroup price to book value ratio.

The stock price per share can be found as the amount listed as such through the secondary stock market. 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. When compared to the current market value per share the book value per share can provide information on how a company s stock is valued.

Or p b ratio 105 84 5 4 1 25. It shall serve as the total value of the assets of the firm or of the company that stockholders would theoretically receive if the firm or the company were to be liquidated. Therefore the company s common equity is 8 900 000 as on the balance sheet date.