Book Value Per Share Significance

The book value of a company stripped to basics is the value of the company the stockholders will own if the firm s.

Book value per share significance. The information needed to calculate bvps is found on a company s balance sheet. It is mainly the difference between the book value of assets and the book value of liabilities which is largely determined by accounting conventions. Book value of equity per share effectively indicates a firm s net asset value total assets total liabilities on a per share basis.

Use of book value per share. Book value per share is a fairly conservative way to measure a stock s value. Price to book value price per share book value of equity per share book value of equity is the theoretical value of what a company s net assets are worth.

But value investors tend to find book value a good starting point to investigating a company especially if the per share stock price crosses below that company s book value. 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. Book value is important such that shareholders will receive that much amount per share if a company is liquidated as on date.

The book value of a company is the difference in value between that company s total assets and total liabilities on its balance sheet. Book value per share is a ratio that compares the net asset value of a company minus preferred equity to the total number of common shares available on the market. Book value is the total amount of company s physical assets excluding patents goodwill minus liabilities.

So in absolute terms book value is the net assets of the company. When a stock is undervalued it will have a higher book value. Value investors use the price to book p b ratio to compare a.