Book Value Of Equity Example

Calculate book value of equity by subtracting a firm s total liabilities from its total assets to arrive at stockholders equity.

Book value of equity example. The book value of the company is 1 500 000. Stock 1 has a high market capitalization relative to its net book value of assets so its price to book ratio is 3 9x. You can find these figures on the balance sheet.

Based on the above formula calculation of book value of equity of rsz ltd can be done as 5 000 000 200 000 3 000 000 700 000 8 900 000 therefore the company s common equity is 8 900 000 as on the balance sheet date. If we apply it to the formula book value of equity total assets total liabilities. It can be greater than less than or equal to zero.

This amount includes common stock retained earnings and other equity. Of equity shares outstanding. Assume there is a company x whose publicly traded stock price is 20 and it has 100 000 outstanding equity shares.

Or book value shareholder s equity broadly equity share capital reserves and surpluses market value market price per share no. What does book value of equity mean. Stock 2 has a lower market cap than its book value of equity so its market to book ratio is 0 9x.

It can also be greater than less than or equal to zero. It is equal to the price per share divided by the book value per share. Book value is the company s total assets minus its liabilities and intangible assets.

As you can see in the example above all assumptions or hardcodes are in blue font and all formulas are in black. For example in apple s 1q report released february 1 2018 the company reported total assets of 406 794 billion and liabilities of 266 595 billion. Book value of equity also known as shareholder s equity is a firm s common equity that represents the amount available for distribution to shareholders.