Book Value Of Capital Formula

The book value per common share formula below is an accounting measure based on historical transactions.

Book value of capital formula. 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. Mathematically it is represented as book value of equity formula owner s contribution treasury shares retained earnings accumulated other incomes. Book value is typically shown per share determined by dividing all shareholder equity.

Book value of equity formula it is calculated by adding the owner s capital contribution treasury shares retained earnings and accumulated other incomes. Suppose a company has a book value of 35 million and there are 1 4 million common shares outstanding. The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding.

If the value of bvps exceeds the market value per share the. Book value may also be. By the number of common stock shares that are outstanding.

Weighted average cost of capital wacc is defined as the weighted average of cost of each component of capital equity debt preference shares etc where the weights used are target capital structure weights expressed in terms of market values. We will discuss the difference between book value wacc and market value weights and why market value weights are preferred over book value weights. For assets the value is based on the original cost of the asset less any depreciation amortization or impairment costs made against the asset.

Divide 35 million by 1 4 million shares for a book value per share of 25. In accounting book value is the value of an asset according to its balance sheet account balance. Bvps frac total shareholder equity preferred equity total outstanding.

To make this easier convert total book value to book value per share. 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. Stockholders equity stockholders equity also known as shareholders equity is an account on a company s balance sheet that consists of share capital plus.