Book Value Per Share In Layman S Terms

Assume that a company has 100 million in assets on the balance sheet and 75 million in liabilities.

Book value per share in layman s terms. It indicates the level of safety associated with each common share after removing the effects of liabilities. If the total value of a company is 10 million and it has 1 million shares of stock outstanding. It has a 10 per share book value.

The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding. The book value of that company would be calculated. Learn more about how to calculate this ratio what it tells you and how investors use it to guide their decisions.

What is the definition of book value per shares. Book value per share is a fairly conservative way to measure a stock s value. The book value per share formula is used to calculate the per share value of a company based on its equity available to common shareholders.

Now the shares will trade at whatever value the market gives them based on future expectations being good or bad and technical price action patterns the book value is only the current fundamental intrinsic value of the company based on. The formula for book value per share is to subtract preferred stock from stockholders equity and divide by the average number of shares outstanding. Example of how to use the p b ratio.

Book value per common share or simply book value per share bvps is a method to calculate the per share book value of a company based on common shareholders equity in the company. The book value per share bvps is a ratio that weighs stockholders total equity against the number of shares outstanding. 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.

Clorox book value per share analysis book value per share b s is can be calculated by subtracting liabilities from assets and then dividing it by the total number of currently outstanding shares. In other words this measures a company s total assets minus its total liabilities on a per share basis. 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.