Book Value Of Company 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.

Book value of company formula. Formula to calculate book value of a company. The book value figure is typically viewed in relation to the company s stock value market capitalization and is determined by taking the total value of a company s assets and subtracting any of the liabilities the company still owes. A conservative approach to evaluating a company s worth is to calculate tangible book value also called net tangible assets.

Below is the book value formula. The term book value is a company s assets minus its liabilities and is sometimes referred to as stockholder s equity owner s equity shareholder s equity or simply equity. The price to book value ratio p b formula is also referred to as a market to book ratio and measures the proportion between the market price for a share and the book value per share.

The sum total of these valuations is the basis for the value of the business. It can be defined as the net asset value of the firm or of the company that. Book value formula calculates the net asset of the company derived by total of assets minus the total liabilities.

Nbv is calculated using the asset s original cost how much it cost to acquire the asset with the depreciation depletion or amortization of the asset being subtracted from the asset s original cost. Mathematically it is represented as book value of equity formula owner s contribution treasury shares retained earnings accumulated other incomes. In many cases the value of the intangible assets exceeds the value of the tangible assets which can result in a major amount of arguing between the buyer and seller over the true value of these assets.

Net book value nbv refers to a company s assets or how the assets are recorded by the accountant. There is no perfect valuation formula. Alternatively book value can be calculated as the sum total of the overall shareholder equity of the company.

The result tells you what the tangible worth equals after liabilities are subtracted from tangible assets. 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. Price to book value is an important measure to see how much equity shareholders are paying for the net assets value of the company.